According to a survey by Move.com, 12.1 percent of homebuyers intend to purchase an investment property this year, compared to only 5.6 percent of buyers polled in April.
The percentage of investors shopping for property also jumps higher when it comes to foreclosed property. 42 percent of foreclosure buyers are purchasing for an investment. 57.6 percent of foreclosure shoppers plan to live in the home they buy.
The survey also shows that 23.6 percent of investors and buyers believe that home prices are already as low as they will go. Nearly 20 percent feel a sense of urgency when searching for a bargain.
Another factor motivating home buyer’s off the sidelines is the real threat of rising interest rates. Wall Street guru’s, who agree on very little, warn that lending rates will rise in the near future. With real estate prices at their lowest levels, buyers risk much more in waiting to purchase, than they do by locking in record low rates on their loan.
Prediction: We believe the leading indicator of an interest rate hike will be falling unemployment claims. When unemployment claim filings fall below 500,000 per month, a rate hike is likely!
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I’m thinking Turkey. The leaves have fallen, lawn mowers are stored and furnaces are in use. It’s at this time of year that many of our customer’s ask… “Should We Take Our Home Off the Market During the Holidays?”
The First Time Buyers Tax Credit has been extended until April 30, 2010 AND it’s been expanded. Step Up Home Buyers, who make a lot of money, can also receive $6500 in Tax Credits until April. Big tax incentives mean that smart buyers will be house shopping vs mall shopping this holiday season.
Interest Rates are at Record Lows. 30 year fixed rate mortgages are below 5 percent. But, with the dollar weak and falling, low rates may not be around for long. Serious home buyers are aware of the difference that even a small interest rate increase would make in their house payment. The combo of Tax Credits and Low Interest Rates create strong urgency among buyer’s. Smart seller’s spruce up their homes and play into the pressure.
Holiday Shoppers are Serious Buyers. Trust me. Everyone of us loves the holidays. So, the people who are out looking for homes in November, December and January are SERIOUS Buyers. Do you really want to pull your house off the market when the most serious people are shopping?? Think about it and gear up!!
Less Competition. Many sellers don’t read our blog. They foolishly pull their homes from the market during the holidays, and this year will be no exception. Less competition and MLS exposure could make the difference between For Sale and Sold, this Christmas.
Houses are Pretty during the Holidays. Staging your home is easy during the holidays. The mood is festive. Holiday colors are warm and inviting. Candles, centerpieces and decorations touch the heart and convey a peaceful lifestyle. Light the candles, make a roaring fire, bake some goodies and turn on some relaxing holiday music. Buyer’s love to see a home decorated and looking special. Don’t let this once a year opportunity pass you by.
Curb Appeal. If your landscape and lawn isn’t that great, breathe a sigh of relief that no one else’s is this time of year, either. Add seasonal color, a wreath, perhaps some decorations. Just keep it subtle and classy. No mowing, no weeding and trimming, and best of all snow covers all…
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The latest news about home sales through October 31st, was nearly more scary than Halloween. Here are the high or low lights, depending on your market position.
Existing home sales were up 11 percent, due mostly to the $8000 tax incentives.
Sales prices were down 11 percent. Average US home price is now $177,900.
One third of all homes sales were short sales or foreclosures.
Foreclosures are up nearly 90 percent. And, the banks reported that one-third of all their foreclosures are being held off the market. Their strategy is to trickle more homes on the market, in hopes of keeping inventory lower, and therefore, prices higher. Bottom Line. There will be a huge second wave of Foreclosures hitting the market in 2010.
The loan crisis isn’t over, it’s just starting in new places with new people. Most defaulting subprime borrowers are already on the street. When picturing the new homeless, visualize the bigger, Prime borrowers. Expect foreclosures to rise dramatically in Salt Lake, Provo and Boise. Also, expect a new surge of foreclosures in upscale, step-up homes and communities.
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Great news for home buyers, sellers and owners, alike. The homebuyer tax credit has been expanded to include step up buyers, who have owned a home for 5 years. It also extends the tax credit through the end of 2010.
GREAT NEWS!
It appears that Senate Democrats have recognized the tremendous value of the First Time Homebuyers Tax Credit and odds are it will be renewed soon. At this time, it is believed that the credit will allow anyone purchasing a home, by April 30, 2010, to participate and receive the full credit available.
The credit will continue until the end of 2010, but the amount of tax credit will drop by 2 percent every 90 days. The graduated benefit should help the housing market recover into and through the 2010 summer selling season.
Here is the text of the story as reported in Bloomberg News today: Senate Democrats on Board with Credit Extension
Senate Banking Committee Chairman Chris Dodd (D-Conn.) says Senate Democrats have agreed to extend the first-time home buyer tax credit. The latest version extends the program to home sales signed not closed by April 30. Purchasers would have another 60 days to close the sale. The credit will also be expanded to include so-called step-up buyers who have lived in their current home for at least five years.
The credit would be cut slightly to a $7,290 cap. Income eligibility for first-time home buyers would stay the same, but it would rise for step-up buyers to $125,000 for individuals and $250,000 for couples. Source: Bloomberg News, Dawn Kopecki and Ryan Donmoyer (10/27/2009)
Good news for US Housing. For those of you still searching for a BOTTOM in the real estate market, we hit it in January 2009. A double bottom, in fact. Take a look at the CHART.
China raised its minimum down payment requirement to 40 percent, in an effort to slow down the overheated housing market in Hong Kong. Conversely, in the US, we still offer financing with NO Money Down, when the tax rebate is combined with FHA or VA financing. Quite startling in light of the lessons we learned from subprime loans.
Uncle Sam Added 5 Percent to Home Prices. Government interventions in the housing market have inflated home prices at least 5 percent higher than they would have been. Artifically low interest rates, $8000 tax credits, push for loan modifications and efforts to stall foreclosures may have created a false bottom. Since the props won’t last forever, the risk of price decline in the future is significant.
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The stock market is back to 10,000, the level it reached in 1999. Sales of existing homes were up a whopping 8 percent, to the highest level seen in 2 years. The news is abuzz about an extension of the First Time Buyer Tax Credit….But, is it time to “Party like it’s 1999″???
Here is a snapshot of Friday’s real estate news. You decide.
A record number of people snapped up bargains in September. The median price of a home sold in the US fell to 174,000, down 9 percent from $191,200 one year ago. Note: The significant price drop could be blamed in part to the First Time Buyer Tax Credit which favors the lower priced homes.
Keep in mind that the homes counted as “sold” in September were actually purchased in June, July and August. No doubt the push to buy this summer had something to do with the expiring $8000 Tax Credit.
70 percent of all homes closed in September were foreclosures or distressed property.
80 percent of the homes closed, were sold for less than $250,000. The market above $250,000 has stalled and inventory is rapidly growing. And, the more expensive the home, the slower the market.
The biggest sales gains (not price gains) were seen in the hard hit cities of Miami and Orlando. Sales in Miami were up 71 percent from last year, Orlando 65 percent. Note: Prices are still falling dramatically in the Sunshine state. In Miami and Orlando prices declined more than 30 percent from last year; Tampa prices fell to $133,000, down 17 percent.
Sales of existing homes were down nearly 20 percent in Atlanta and Birmingham. Local Realtors blame job loss for lack of activity.
Prices were flat or up a bit in some cities: Dallas, Houston, San Antonio; Tulsa; Jackson, MS and Washington DC.
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Not surprisingly, real estate industry lobbiest are attempting a full court press as they make a final push for extension of the first-time buyer tax credit.
And, it’s little wonder. The IRS estimates that 1.4 million homebuyers have claimed the credit through August, and the Realtors Association estimates the credit was crucial in pushing 355,000 of those buyer’s off the fence.
If the real estate industry gets it’s way and the amendment passes, the $8000 tax credit would be extended to June 30th, 2010 and it would allow more taxpayers to qualify for the subsidy. The amendment would increase the income limit to $150,000 for a single filer and $300,000 for a couple, up from the current limit of 95,000 and $170,000, respectfully.
The Pro’s: Why Vote “Yea”
Lenders are still in trouble, as more people default or fall behind on their mortgages. Experts predict an additional 1.5 million foreclosures in 2010, increasing supply and further eroding prices and demand.
Dems and Rep like it. The proposal was introduced by a GA Republican, Johnny Isakson, and it is also supported by Democratic heavy-weights. House speaker Nancy Pelosi and Senate Majority Leader Harry Reid support the extension, President Obama hasn’t taken a position for either side.
Still too Many Houses. Although the supply of existing homes on the market has fallen from 1-5 months down to 8.5 months, a healthy market has only 5-6 months supply of house.
Unemployment is Rising. With national unemployment levels at 10 percent, and some states reporting a far higher number, extending the taxpayer subsidy of housing market would likely create and preserve jobs. In addition, people out of work usually means more loan deliquency, foreclosures and further downward pressure on pricing.
The Con’s: Why Vote “NAY”
The Cost to the Taxpayers. The extension comes with a heavy price tag of $16.7 BILLION over 5 years.
As bad as Sub-Prime. Opponents argue that the subsidy has artifically propped up the prices of inexpensive homes, targeted by first-time buyer’s, thereby creating another potential mini-bubble in affordable housing.
Both Opponents and real estate industry admit that most people who claimed the $8000 deduction, would have purchased a home anyway due to historical low rates and steep price declines.
Fraud. The IRS has identified over 100,000 cases of fraud involving the tax credit. On Thursday, the House Ways and Means Committee is scheduled to take a closer look.
Did we mention the cost to taxpayers is $16.7 BILLION?
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Toxic, sulfur laden sheetrock, Made in China, is making people sick, causing electrical wiring to go crazy and is corroding copper, wire and stainless steel in American homes. The problem has affected thousands of homes in 20 states, yet, the US court system is powerless when to hold Chinese manufacturers (most of which are owned by the Chinese government) responsible for problems caused by their products.
The hardest hit area of the country may be the slowly recovering New Orleans area, and the coastal area’s wiped out by Katrina. After enduring floods and mud, this man-made victimization is the last thing these communities need or deserve. For those wondering how bad the problem is….The problem is so bad that local governments, already low on funds, are waiving property taxes for homes rebuilt with the Made in China, toxic sheetrock.
Facts About Toxic Chinese Drywall and Sheetrock:
The sheetrock may emit a sulfuric odor, which smells a bit like rotten eggs.
Health Problems are being Reported. The most common health effects from the drywall are skin rashes, blisters and headaches.
Homeowners insurance does not cover claims due to construction defects. When insurers discover a property has Chinese drywall, they are canceling homeowner policies.
The gases emitted by the Chinese Drywall eat away at any copper, aluminum or stainless materials inside the home. This means that appliances, wiring, mirrors, computers, toys, plumbing pipes and fixtures, jewelry, HVAC or any systems that contain these component materials will also be damaged, usually beyond repair
Seller’s of Homes that contain Chinese Sheetrock must disclose that fact, even if all the sheetrock in the home has been replaced.
If your home contains any Chinese Made Drywall/Sheetrock file a compliant with Consumer Product Protection Council and also check about making a local compliant with your state.
For updates on the Chinese drywall, multi-district lawsuits (MDL #2047 to to www.laed.uscourts.gov and click on Drywall MDL.
One tell tale sign of toxic sheetrock can be seen in the corners of mirrors
Watch for corrosion in and around plumbing fixtures, refrigerators, ac units, on stainless steel appliances or any area with metal components.
Our two cents: In light of this most recent, very serious, and potentially deadly, problem with cheap imports, all Americans need to reconsider their ongoing love affair with everything cheap and Chinese. If the US government, who allows these imports, can’t force the Chinese manufacturers to stand behind the products they sell, then the retailers, who chose to buy these goods should have to. The cost of uprooting families and replacing all the sheetrock, mechanical systems and personal property in over 60,000 reported homes is overwhelming. If anyone deserves a taxpayer bailout, it’s these innocent homeowners who have been victimized by governments and retailers, alike.
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Case Shiller just released its latest report on the state of the residential estate market. The good news is that home prices are falling more slowly. The bad news is that that we have a little ways to go.
What the Numbers Show:
Through August, 2009, the price of an average home sold in the US fell approximately 13 percent, year over year, from 2008 levels.
Home prices have now dropped to 2003 valuation levels, wiping out 6 years of home appreciation.
Since the peak in 2006, average home prices are down 33 percent.
What Do the Numbers Say About the Future??
Prediction: The “average” home price will likely fall more than 13 percent by year end. Reason: Home prices are always at their highest in the spring and summer. Families move during this time of year and they buy the largest, most expensive properties. As a result, Summer home sales skew the “average” price upward in the fall, but only temporarily.
Prediction: Home Sales will suffer a downturn due to the expiration of the $8000 First Time Buyer’s Credit. So far this year, 350,000 buyers have been persuaded to purchase because of this incentive. To read more about the success of the 1st Time Home Buyers Tax Credit, CLICK HERE.
Our Crystal Ball: The pace of the fall is slowing, but the expiration of the tax credit and the ”shadow inventory” of another 1.5 Million foreclosures will continue to put downward pressure on the market in 2010. As a result, we predict that 2010 home prices will decline 6-7 percent. The upside is that nearly all buying risk is out of the market. Interest rates are at historical lows. Any increase in rates would erase the possible gain a buyer would achieve from correctly timing the exact bottom…even if the timing were perfect.
Bottom Line: If you plan to buy a home within the next year, now is a great time. Chose the best home, in the best location and the one that you can easily afford. Live and enjoy the home for at least 5 years and you will likely be patting yourself on the back for a job well done.
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The $8000 Tax Credit for first time home buyer’s (people who have not owned a home in the last 3 years) expires on November 30, 2009. With the expiration date drawing near, the Realtor and builder lobby groups are pushing lawmakers to extend the program for another 6 months. If they are successful, it will cost taxpayers of nearly $15 BILLION.
“Yea” or “Nay”??? Before we cast our vote, we decided to find out whether the tax incentive successful or not? Specifically, did it persuade people to jump into the market? Would it be a good investment for taxpayers going forward?
According to a poll conducted by Zillow, the tax credit was persuasive.
18 percent of home buyers said the tax credit was the main reason they pushed to buy a home before November 30, 2010.
Based on the number of first time buyer’s in the marketplace, a 6 month extension could persuade another 335,000 (18 percent) buyers to buy a home of their own.
If the first time buyer credit is extended, home sales would likely increase 5 percent. Without it, sales would be down as much as 2 percent.
Only 31 percent of first time buyers said the credit had no influence on their decision to purchase.
69 percent of buyers said the tax credit was important in motivating them to buy a home this year.
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In August, InfoTube warned its readers about the New Wave of Foreclosures that would be pounding the market, further driving up inventory and eroding prices. Today, we learn that the Wall Street Journal agree’s with our accessment of the future market conditions for real estate.
Excerpt from the Wall Street Journal:
“The size of this shadow inventory is a source of concern and debate among real-estate agents and analysts who worry that when the supply is unleashed, it could interrupt the budding housing recovery and ignite a new wave of stress in the housing market . . . Analysts who track the shadow market have focused primarily on the gap between the number of seriously delinquent loans and the number of foreclosed homes for sale by mortgage companies. A loan is considered seriously delinquent, which typically means it is headed to foreclosure, if it is 90 days or more past due.
As of July, mortgage companies hadn’t begun the foreclosure process on 1.2 million loans that were at least 90 days past due, according to estimates prepared for The Wall Street Journal by LPS Applied Analytics, which collects and analyzes mortgage data. An additional 1.5 million seriously delinquent loans were somewhere in the foreclosure process, though the lender hadn’t yet acquired the property. The figures don’t include home-equity loans and other second mortgages.
Moreover, there were 217,000 loans in July where the borrower hadn’t made a payment in at least a year but the lender hadn’t begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren’t in foreclosure, up from 8% a year earlier.”
What this means for Home Seller’s: Time is not your friend. The shadow of inventory of distressed property will continue to place downward pressure on home prices. Based upon our years of experience, we predict that home prices will fall an average of 7 percent in 2010.
If you need to sell your home, DO NOT chase the market down. Price your property aggressively, then market the home to as wide an audience as possible. To learn about the best way to reach the mass buying market, CLICK HERE.
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Bank of America, along with other lenders, report that a huge wave of new foreclosures will flood the market, once again. The second wave in foreclosures is due to the slowing of the loan modification program and the new release of properties that the banks have been holding.
Currently, 1.5 million homes are in foreclosure. More Worrisome…an additional 3.5 - 4 Million home loans are “Seriously” delinquent or are in default. Many of these loans are newer, high quality loans that have fallen into trouble due to job losses. Job losses mean no income, so modifying or saving the loan is not an option for these homeowners.
Buyer Alert: The $8000 Tax Credit for Buying a Home Expires in Only 90 Days. If your loan does not close on or before November 30, 2009, you lose $8000 Grand. Period. With loans currently taking 90 or more days to close, you must buy a home now, in order to qualify.
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For a fun, quick explanation about what closing and title costs are, and how the system of buying and selling a property work, watch this entertaining 2 minute video.
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It seems everyone these days is looking for a bottom in the housing market, or a sign of normalcy, as we’ve known it. The truth may be that housing will never return to what normal has been in the past. The reason isn’t the just the economy or tighter lending standards, it’s may be simple demographics.
Please consider why trends in housing may have changed, Permanently.
Baby Boomers: The baby boomers (born 1946-1964) are the largest and spendiest generation in American history, and their 40 year shopping spree is coming to an end.
McMansion Glut: Boomers are buying fewer single family homes and they are getting rid of the suburban McMansions they purchased when their children lived at home. Evidence already shows that boomers favor 2 and 3 bedroom condo’s over 4 or 5 bedroom houses. The Boomer trend to a smaller house, combined with fears of gas prices and long commutes, mean that the big house in the burbs is not the ideal dream house or location that is has been in the past.
Baby Boomers, Again: Boomers are reorganizing their finances. After the stock market crash, and with retirement approaching, fewer boomers will be purchasing vacation and second homes.
Generation X: The generation born between 1965-1976 will be unlikely to bid up home prices. First, there are only 44 million X’ers compared to 76 million boomers. Secondly, they are not as wealthy as their parents, and they are deeper in debt, due in part to college loans.
Migration Back to City Life: Due to our aging population, smaller family size and energy costs, people are returning to urban area’s that have not been overbuilt and offer quality of lifestyle.
Permanent Changes: The days of buying a huge home on a big lot, and paying for it with a 2 hour commute, may be ending. This trend could mean that owners in McMansion communities, with little to no public transportation, will havetrouble finding buyers. Some people predict that the large, single family homes, located miles from urban centers, will be subdivided into inexpensive housing for low and moderate income families, as the car lovers who moved to the burbs return back to the convenience of city life.
One thing that is certain is that change happens. As environmental, economic, political and cultural forces change the way we live, our view of residential home investing will change, too.
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A recent news article by Reuters states that “The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011.”
Meaning? Half of us will be upside down, underwater, or whatever you want to call it over the next 2 years? Pretty scary. How do they know that? One indicator they use may be the Shadow Inventory of Homes, which will eventually enter the market place over the next 3 years.
So, what is a Shadow Inventory of Homes and How Does it Affect Future Home Values? Technically, a property is not in foreclosure until the lenders files against a deliquent loan. Lenders are purposefully not filing to foreclose, in order to control the present inventory by keeping homes off the market. This creates a Shadow Inventory of Homes in Default. Why do they do this? Simple economics, really. Less supply creates more demand (ie: higher prices) for the property they already have for sale.
Since, we know lenders are holding back the number of homes that should be in foreclosure, how many “shadow” distressed properties will come into the market in the future? Truefully, we can’t know the exact number. That is the reason it is referred to as a Shadow Inventory. We can all see that the problem is lurking out there, but we can’t identify the exact numbers or the amount of future damage because “only the shadow knows…”.
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