Posts Tagged ‘Flat Fee MLS’
Good news. Bad news. Real Estate Mixed Bag in 2010
The housing market has been sending some serious mixed signals for months now. The one certainty is that the real estate market is in flux, and will likely be for months to come.
FIRST, THE GOOD NEWS:
- Although interest rates have been increasing, they remain at historical lows. This is good news for buyers who act quickly, as none of the experts expect rates to remain this low later in 2010.
- The $8000 tax credit for first time buyers was expanded to include existing home owners, as well. The timing of this offer is crucial. Buyers must close on or before June of 2010 to collect their free cash.
- Home prices and demand have steadily increased month over month throughout October of 2009.
- Although some markets may slide a bit further, we are definitely in the last innings of the crash. Even if we have a bit more downward pressure, 2010 will be the bottom of the housing crash.
- Home seller’s who use the power of the MLS and the Internet to realistically market their properties, will see more buyers and will have much more pricing power than they’ve experienced in years.
- In markets, such as Phoenix, you can buy a new home for $800 a month, making it cheaper to own a home than rent it.
THE BAD NEWS:
- According to Bob Curran, director at Fitch Ratings, a mountain of foreclosures will hit the market in 2010. And, a 10.5 percent unemployment rate will cause a surge in new homeowners that will fall into default.
- Per Lawrence Yun, chief economists with the National Association of Realtors (NAR) expects a record 3 million foreclosures in 2010, up from 2.1 million in 2009.
- John Burns, president of John Burns Real Estate Consulting, is even more bearish. He thinks 50 percent more people will lose their homes to the bank than they did last year. Why? Lenders were under pressure to postpone foreclosures in favor of loan modifications. And, the banks weren’t staffed to handle all the defaulted loans, as they now are.
- The Office of Comptroller of the Currency and the Office of Thrift Supervison released a report that said the results of the loan modification program was disappointing. 61 percent of the loans that were modified are now in default again. The offices predict another wave of foreclosures in 2010, which could cause prices to fall another 5 – 10 percent before the market stablilizes.
- The Federal Reserve plans to end the program that has kept mortgage rates so low for so long. Rates have already passed the 5 percent mark in anticipation.
- The first time buyer and existing home buyer tax credit program expires in early 2010. To qualify for the stimulus, buyers must purchase by April and close no later than June of 2010. This program has certainly lured buyers into the market place and its expiration will take a toll on demand in the 3rd and 4th quarters.
InfoTube Prediction: Since the housing market peak in the summer of 2006, home prices have dropped over 30 percent on average. Prices in some markets such as Las Vegas, Phoenix and parts of Florida and California have fallen more than 60 percent. Some markets have further to go, but we are in the final innings of the crash. Even if we go lower, we will see the bottom in 2010. But, don’t look for a rebound off the bottom. The damage was too deep and too systemic for a “V” shape recovery. The housing market will skate along the bottom for quite a while and it will probably be 2013 before most people notice any rebound.
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5 NEW RULES FOR REAL ESTATE INVESTING
The new, US economy brings with it, a whole new set of rules for investing in real estate. In the past, real estate has been a tried and proven method for quickly building wealth, but the current rules for successful investing have changed.
Making money in real estate is still a possibility, but investor’s must pay very close attention to the changes that this ecomonic cycle brings. Today’s investors need to reexamine their criteria for buying, selling or holding property. They also need a lot of patience and flexibility, along with complete and detailed research, before they jump in and take advantage of some of the best bargains seen in years.
NEW RULES FOR INVESTING IN TODAY’S REAL ESTATE MARKET
NEW RULE #1: LOCATION, LOCATION, LOCATION. For the baby boom generation, the suburbs were “the” location for profit and life style. Fuel was cheap, commutes were short and the ‘burbs’ offered the big house, with picket fenced yards and the image of the Leave It to Beaver lifestyle. Not so much, today. Today, it is the urban scene that is making a comeback. While homes in downtown area’s are generally more expensive on a price per square foot basis, buyer’s today are willing to pay a bit more money for less square footage. Urban center living eliminates long commutes, urban sprawl, expensive fuel bills and provides nearby ammenities without the need to drive.
NEW RULE #2: STAY PUT AND DO NOT REMODEL WHEN THE MARKET IS SLOW. In the past, many homeowners gained equity by renovating their old home while the market was slow. The improvements added value to their real estate, while they waited for more favorable market conditions. In the 2008 housing market, any major renovations should be analyzed purely from a return on investment perspective. According to Remodeling Magazine, which just published its Cost vs Value Report, homeowners should be warned that they will not recover as much of their costs for remodeling as they did in the past. The best investment today’s homeowner can make in terms of renovating fall in the category of paint, landscape and green, energy saving features.
NEW RULE #3: Technology and Networking are the Key to Locating Great Properties. Home listings, valuations and other crucial information for real estate investment used to be available only through a real estate agent. Now, the genie is out of the bottle and the best sources for real estate information can be accessed with nothing more than the click of a mouse. More technology has also made it possible for home seller’s to list their property on the powerful, national MLS, without listing with a agent. Companies like Why 6 Percent.com, and its national network of broker’s, list property for seller’s, investors and builders who want the exposure the MLS provides, but do not want to pay 6 percent of their sales price for the priviledge. Technology has changed the way buyer’s and seller’s connect, and the way that property is advertised. Smart investor’s should take advantage of this new alternative, as it offer’s accuracy, speed and control unmatched by the traditional route of buying and selling through agent’s only.
New Rule #4: BIGGER IS NOT ALWAYS BETTER. In the past, agent’s and home builder’s advised buyer’s to purchase as large of a home as they could possibly afford. As a result, home size in the 1970’s averaged about 1700 square feet, with 3.1 people in the average family. In 2004, the average size of a home was around 2400 square feet with only 2.6 occupants on average. Today’s lending and energy crisis has changed our thinking and bigger is not necessarily the best investment. Buyer’s are looking for a home that meets their needs without paying for space they don’t need. Today’s investor needs to adapt their thinking and focus on useable living space, energy saving ammenities, security and conveniences instead of targeting the over blown McMansion. Another demographic also backs up the theory that smaller may be better. For the next two decades, retiring baby boomers will be scaling out of their McMansions, now that their families have left the nest. The boomer’s will favor smaller homes with more ammenities, located in convenient neighborhoods that are clean and safe.
New Rule #5: FLIPPING IS OUT. BUY AND HOLD IS IN. Today’s falling prices and the huge inventory of unsold property means that potential bargains are plentiful. Smart Investor’s will take advantage of the current market and lock themselves into a good deal now, and hold the property until stability returns. Prospective investors should be warned that the crash we are experiencing will not turn around anytime soon. Prices will continue to fall, though not as dramatically as we have seen in the recent past. As prices firm and inventory is sold, the patient investor will see gains, but they should plan on waiting five years to ring the register.
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