Positive Market Indicators…
The Real Story…
News and commentary about the real estate market and related topics.
Dave Parrish, ABR®, CSP, GRI, ePRO®,REALTOR ®, RE/MAX MarketPlace
The opinions expressed here are my own and don’t necessarily represent those of RE/MAX International.
Positive Market Indicators…
I was attending a funeral last weekend and ran into a Realtor friend from out of town… Lake Jackson, Texas… As you might expect our conversation eventually ran into a discussion of market conditions. Like so much of our country, she too had that experience of a tough market with an abundance of foreclosures, short-sales and steeply declining market prices. However, things had recently changed… She was experiencing a Seller’s Market! They have a shortage of inventory! Move-in ready homes are going under contract within 30 days!
If you’re a regular reader, you know that all markets are not the same… As a matter of fact the much spoken of averages that are used to simplify discussions about market conditions are more than misleading! All markets are unique and for the most part independent… What is happening in one market has little if any effect on another market.
Even so, what is happening in distant or even nearby markets can be an indicator of what is possible and the general direction of markets.
Recent Industry Headline (Bloomberg.com): “Home Prices Rise in Half of U.S. Cities as Markets Stabilize” a (May 9, 2012) report citing recent reports from the National Association of Realtors stating that: Prices for single-family homes climbed in half of U.S. cities in the first quarter as real estate markets stabilized. The median sales price increased from a year earlier in 74 of 146 metropolitan areas measured. This being a further improvement over an increase of prices in the fourth quarter in 29 off the 146 markets measured.
While we have not seen an increase in prices locally, we have seen a noticeable reduction of homes for sale (inventory) and a moderate decline in the rate at which prices are falling, which is often a precursor to market stabilization and eventually price increases.
In other news, the often maligned Fannie Mae recently (May 7, 2012) reported “Confidence in Economy and Home Values Increasing.” In this report based on Fannie Mae’s April 2012 National Housing Survey both the expectation for home prices and the percentage of those who think the U.S. economy is on the right path reached record highs for the current era. Americans continue to expect home prices to go up, with the projection averaging 1.3 percent over the next 12 months, the highest value recorded. At 71 percent, a high percentage of Americans still say it is a good time to buy while the percentage that said it is a good time to sell was 15 percent, a 1 point increase from March.
A recent CNN Money report (May 3, 2012) stated… “Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market.
With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable — but it won’t stay this way for much longer.
Stuart Hoffman, chief economist for PNC Financial Services, said he expects home prices to flatten out by the third quarter and start climbing by next year.”
Other financial institutions agree that the market is improving and see an increase in prices albeit a small increase in 2013.
While the expiration date on the fire sale of housing is still in question by location, when you look at these trends and the fact that Housing Affordability has reached it’s highest level since record keeping began in 1970, combined with even lower interest rates, now increasingly looks like the time to buy!
Even so, I remind you of the three most important factors in real estate: Location, Location, and Location… Alabama as a whole remains one of those locations where the impact of the down market is still being felt… according to the CoreLogic index the states suffering from the highest level of average housing deflation (loss in value) in the last year were: Delaware(10.6%), Illinois (8.3%), Alabama (8.0%) and Georgia (7.3%).
But it does look like the market is turning… It looks like we are bumping along the bottom of the market with gradual improvement on the horizon… but remember that varies from location to location, from neighborhood to neighborhood!
The big question is will this good news hold or will another wave of foreclosures cause a further market decline before the next bottom is felt. This Shadow Inventory is the topic for our next conversation… until then…
May the market be with you.
Some Do’s and Don’ts… for Holding the Deal Together…
The Real Story…
News and commentary about the real estate market and related topics.
Dave Parrish, ABR®, CSP, GRI, ePRO®,REALTOR ®, RE/MAX MarketPlace
The opinions expressed here are my own and don’t necessarily represent those of RE/MAX International.
Some Do’s and Don’ts… for Holding the Deal Together…
It’s a Buyer’s Market… even so if you’re depending on someone else to provide the money for your purchase … that is you’re going to have a mortgage… you’ve got to be aware of and follow certain rules to keep the deal together.
In the excitement of realizing a dream… getting that new home… I have seen buyers do things that have resulted in their dreams being crushed. Over the years I have seen many deals that have been delayed (and even killed) by seemingly insignificant actions… Play it safe… follow these Do’s and Don’ts to protect your deal.
- Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios…higher ratios make for riskier loans…and sometimes qualified borrowers no longer qualify.
- Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
- Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more approvable. Wrong. A major component of your score is your length and depth credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those to the determinant of your score.
- Don’t co-sign other loans for anyone. When you co-sign, you are obligated. With that obligation comes higher debt-to-income ratios, as well. Even if you swear you won’t be making the payments, the lender will be counting the payment against you.
- Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Frankly, before you even transfer money between accounts, talk to your loan officer.
- Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with your loan officer.
- Don’t change jobs. A new job may seem like a perfect opportunity… But any change in employment status will be scrutinized closely and even if the job is for an increase in pay may create a less favorable outlook, as far as your lender is concerned. This is especially true if you are making a change in the type of work you do.
- Do pay your bills on time. A single late payment can modify your credit score sufficiently to kill the deal. Even if it’s only a few dollars… the impact can be devastating!
- Do keep a sufficient balance in your checking or savings account to cover the money you must bring to the table … even if you are on a no money down deal… last minute expenses could arise that will need to be covered by you in order to close. My advice is Save, Save, Save!
- Do consult your loan officer before doing anything that remotely reflects on your financial situation. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. Any blip in income, assets, or credit should be reviewed and executed in a way to keep your application in the most positive light.
This is truly an exciting time for the homebuyer… keep these rules in mind and make your dream a reality.
May the market be with you.
SOLD… Not so fast!
The Real Story…
Dave Parrish, ABR ®, CSP, GRI, ePRO ®, REALTOR ®, RE/MAX MarketPlace
For an archive of The Real Story visit: http://www.DavidParrishRealtor.com/myblog
The opinions expressed here are my own and don’t necessarily represent those of RE/MAX International.
SOLD… Not so Fast!
Recent Market Notes:
- Jobless Claims fell to the lowest level since February 2008
- Building Permits climbed to the highest level since October 2008
- The NAHB Housing Market Confidence index was at the highest level since June 2007
- The Treasury will auction $99 billion in 2-yr, 5-yr, and 7-yr securities next week
- Core CPI inflation was 2.2% higher than one year ago
- Retail Sales posted the largest monthly increase since September 2011
- Weekly Jobless Claims matched the lowest level in four years
- The Dow stock index climbed to the highest level since December 2007
There has been a lot of good news in the market over the course of the last several months. Definitely an increase in the real estate market activity locally. So, many are feeling we’re starting a turn around… They feel prices have hit bottom and back on their way back up although slowly.
I’ll share a very recent story… a true story; although, I’ll not share names and addresses. I listed a home recently for a previous client… Great neighborhood, well maintained and cared for home with lots of amenities added since their purchase four years ago. Not the highest priced home on the block but not the lowest either. While we put the home on the market higher than my recommended price based on my market analysis… not so high that it impacted our traffic…
Short story even shorter… four weeks and we have an offer… low as are all offers today, but not unreasonably low… as a matter of fact it was right where I had predicted the home would sell. Even so, we negotiated it back up to an offer acceptable by my client. Everybody is happy! I am looking like a great agent!
Just got to take care of all those “little details” that happen “after the sale” that make the sale a reality… inspections, title search, title policy issuance, termite inspection and contract transfer, get this thing through the ever changing rues of under writing, mortgage pay-off ordered, closing set with closing attorney’s office, etc.
The purchaser, as is the case for most purchasers, will have a mortgage… That is somebody is going to lend him the money to buy this home. So they (the lender) want to have the home appraised as to current market value based on the historic although recent sales data for similar properties. You know, just in case they have to take the home back and resell it… and also because they will probably re-sell the loan way before the first purchase anniversary arrives. And the secondary market that they are selling to requires certain documentation to be sold to the largest number of bidders… and thus with the smallest discount.
We are in a new world … a world that changed several years ago, that closely watches how appraised values are determined and who can influence those valuations. A world that changed due to past abuses and sometimes even outright fraud. Changes that we needed and yet changes that are very painful.
The hour of truth has been reached… The appraiser comes back with his independent assessment of value based on sales within the past 90 days and preferably for properties within a one-mile radius… It’s $20,000 less than the agreed upon price!
Understandably my client is not happy… as for that matter neither is the purchaser.
My client doesn’t understand why the fact that he has a ready, willing and able buyer that this doesn’t establish the market value! Truth of the matter: one buyer does not a market make, at least not in the world we operate today.
We of course did protest the appraisal and provided additional comps that were rejected due to their distance from the subject property.
So here we are with this $20,000 gap that appears to be a chasm as deep and wide as the Grand Canyon. Either the seller reduces the price or the purchaser makes up the difference before counting a penny toward his down payment. The seller’s equity is non-existent… the $20,000 would have to come totally out of pocket… This is not a short sale… not even remotely a potential short sale at this point in time.
We will continue working to try and find a comp that will save the deal. True we could negotiate some more … and maybe we will… but this sale is not now a sale. No amount of wanting it to be different will by itself make it different.
So the question is: Should the appraisal rules be different? As painful as it is to say this: I don’t know … Probably not! But, if they remain as they are, we are a long way from prices rising or the market recovering. As a matter of fact, I don’t know how prices can ever increase with this current set of rules.
May the market be with you.
Another Indication
Another Indication - 3/13/2012
The Housing Affordability Index was developed over thirty years ago to help consumers determine when it is a good time to buy a home. It’s considered advantageous to the buyer when the index is over 100 because a median income family can qualify for a median price home.
Recent figures released by the National Association of REALTORS’ economic department show that the 2011 index of 184.5 is the highest annual average since it has been calculated. The most recent month released, December 2011, was 194.9. The index is also broken down into four regions of the country.
The two major components that contribute to the index are home prices and mortgage interest rates which are lower than they’ve been in the last five years which account for the dramatic rise in the index since 2006.
The Housing Affordability Index is another indication that this is a good time to buy a home for people who have good credit, a down payment and want a home. It may be the best time we’ll see in our lifetimes.
What You Need to Know about Cancellation of Mortgage Debt
What You Need to Know about Cancellation of Mortgage Debt
Posted By susanne On March 11, 2012 @ 1:07 pm In Consumer News and Advice,Home Owner News,Real Estate Information,Today’s Top Story,Today’s Top Story – Consumer | No Comments
[1]This column is brought to you by the NAR Real Estate Services group.
A lender will, on occasion, forgive some portion of a borrower’s debt. The general tax rule that applies to any debt forgiveness is that the amount forgiven is treated as taxable income to the borrower. Some exceptions to this rule are available, but, until recently, the borrower was required to pay tax on the debt forgiven. A new law enacted in December 2007 provides relief to troubled borrowers when some portion of mortgage debt is forgiven. However, this relief expires on December 31, 2012 and NAR will be working to obtain an extension throughout the year.
Below is some general information you need to know about this law and cancellation of mortgage debt.
General Rule for Debt Forgiveness
If a lender forgives some or all of an individual’s debts, the general rule is that the forgiven amount is treated as ordinary income and the borrower must pay tax on the forgiven amount. Exceptions apply for bankruptcy, insolvency and certain other situations, including mortgage debt.
Current Law for Mortgage Debt
(Jan. 1, 2007 through Dec. 31, 2012): A borrower can be excused from paying tax on forgiven mortgage debt. The debt must be secured by a principal residence and the total amount of the outstanding obligation may not exceed the original mortgage amount plus the cost of any improvements.
Does the relief apply only to a sale?
No. The provision has broader application. Lenders might forgive some portion of mortgage debt in a short sale (when value at sale is less than the amount owed) or in a foreclosure where the debt is wiped out. In addition, if a borrower still living in the home is able to make an arrangement with a lender that reduces the principal balance of a mortgage, the amount forgiven in that workout will not be taxed.
Can the homeowners in a short sale or foreclosure claim a loss?
No. The loss is considered a personal loss and is, therefore, ineligible for either capital loss or ordinary loss treatment.
What happens to the seller when mortgage debt is forgiven?
Until January 1, 2013, the homeowner will pay no tax on any forgiven amount.
Does this provision apply to a refinanced mortgage?
Only in limited circumstances. The relief provision can apply to either an original or a refinanced mortgage. If the mortgage has been refinanced at any time, the relief is available only up to the amount of the original debt (plus the cost of any improvements). Tax relief is generally not available for second mortgages or home-equity lines of credit where the funds are not used for home improvement. Any amount that is not eligible for the relief provision will be taxed as ordinary income.
How does the homeowner get the correct information to the IRS?
The lender is required to provide the homeowner and the IRS with a Form 1099 reflecting the amount of the forgiven debt. The borrower/homeowner must file a Form 982 to reflect the amount forgiven and to show the reason why the forgiven amount is not taxable. Any taxable portion of forgiven debt will then be reported on the homeowner’s Form 1040 for the tax year in which the debt was forgiven.
What if a property declines in value but the owner stays in the house?
The provision would not apply. The provision applies only at the time of sale or other disposition or when there is a workout (reduction of existing debt) with the lender.
Do all lenders forgive mortgage debt when property values decline or the home is in foreclosure?
No. Some states have laws that allow a lender to require a repayment arrangement, particularly if the borrower has other assets. Forgiveness of debt is always at the lender’s discretion.
Linda Goold is the Tax Counsel for National Association of REALTORS®.
FHA Announces Price Cuts to Encourage Streamline Refinancing
NOTE: The announcement below may seem very confusing following last week’s blog post concerning FHA’s decision to rise some of these very same rates. The new guidelines announced here apply only to qualifying refinance applications. The changes mentioned previously are still in effect for original mortgages. Stay tuned things may well change again.
FHA Announces Price Cuts to Encourage Streamline Refinancing
Recently, Acting Federal Housing (FHA) Commissioner Carol Galante announced significant price cuts to FHA’s Streamline Refinance Program that could benefit millions of borrowers whose mortgages are currently insured by FHA. Beginning June 11, 2012, FHA will lower its Upfront Mortgage Insurance Premium (UFMIP) to just .01 percent and reduce its annual premium to .55 percent for certain FHA borrowers.
To qualify, borrowers must be current on their existing FHA-insured mortgages which were endorsed on or before May 31, 2009. Late last month, FHA also announced it will increase its upfront premiums on most other loans by 75 basis points to 1.75 percent. In addition, FHA will raise annual premiums 10 basis points and 35 basis points on mortgages higher than $625,500.
“This is one way that FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates,” says Galante. “By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden, which will benefit the housing market and the broader economy in the process.”
Currently, 3.4 million households with loans endorsed on or before May 31, 2009, pay more than a five percent annual interest rate on their FHA-insured mortgages. By refinancing through this streamlined process, it’s estimated that the average qualified FHA-insured borrower will save approximately $3,000 a year or $250 per month. FHA’s new discounted prices assume no greater risk to its Mutual Mortgage Insurance (MMI) Fund and will allow many of these borrowers to refinance into a lower cost FHA-insured mortgage without requiring additional underwriting. FHA-insured homeowners should contact their existing lender to determine their eligibility.
Last month, the Obama Administration announced a broad package of actions and legislative proposals to help responsible homeowners save thousands of dollars through refinancing. This includes the changes announced today that will benefit current FHA borrowers—particularly those whose loan value may exceed the current value of their home. By lowering monthly mortgage costs for home-owners, FHA hopes to help more borrowers stay in their homes, thereby decreasing the potential for future default and reducing losses to the Mutual Mortgage Insurance (MMI) Fund.
The changes outlined in today’s mortgagee letter apply to all mortgages insured under FHA’s Single Family Mortgage Insurance Programs except:
• Title I
• Home Equity Conversion Mortgages (HECM)
• Section 247 (Hawaiian Homelands)
• Section 248 (Indian Reservations)
• Section 223(e) (Declining Neighborhoods)
For more information, visit www.hud.gov [1].
Another reason to buy sooner than later …
Another reason to buy sooner than later …
If you’re a regular reader, you know that I disagree with the market cheer leaders that have for the past four years have pointed to this (what ever the current year is) being the year of recovery. Plain and simple my view has been that the pressures of the market will continue for several more years… my prediction is for a recovery somewhere between 2016 and 2020.
At the same time all is not doom… No I am not a pessimist! But a reporter of facts… not of individual factoids taken out of context to paint some rose-colored picture and create hopes that are only to be dashed upon the rocky shores of reality. My intent always is to give you the facts so that you can make informed decisions.
Please understand that there is no one answer that works for every buyer or seller. And even though you may have bought and sold multiple home in the past… understand that this is not the market of the past… this market is far from static… it literally changes by the day and the wise buyer or seller needs to align themselves with someone how really knows the ropes and how to properly informed you of the many and specific facets of the market that will impact your buy or sell position.
Yes prices will continue to drop… So many want to wait on the sidelines waiting for the bottom to hit if they are buying or for prices to rise if they are selling… Market timing is problematic in that you can only be sure of the market that has already passed… We will only know that we have hit bottom once the bottom is past and is no longer available.
It is still a Buyer’s Market in most markets… Remember there is not a single market; there are literally hundreds of markets in the Birmingham Metro area alone! Each one has a different set of dynamics and each has the potential of defying national statistical averages… as a matter of fact it is rare that a particular market mirrors those national or even regional measurements.
You need the facts on your specific market to make an informed decision.
Even so, there are factors, beyond the specific geographic markets or even the raw price of a home that impact the cost of buying a home, factors that apply to wider segments of the overall market.
Given that most home purchases today involve a mortgage… The cost of the mortgage is one of those factors that cross some market barriers. There is the obvious and more easily discernible cost of a mortgage know as the interest rate, we can watch those rates on a daily basis on the internet; although, those quoted rates may not be the ones that an individual buyer will qualify for… those are all based on the caveat: WAC: With Acceptable Credit.
Perhaps the most favored form of mortgages in today’s market is the FHA loan (eligible for loan amounts less than $271,050 in all Alabama counties other than Baldwin County) which is about to experience a fee hike. FHA loans allow for smaller down payments, as low as 3.5 percent compared to traditional loans, and they often have less stringent credit requirements, which have made them soar in popularity in recent years. About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages. Remember FHA insures loans but doesn’t issue them. Most financial institutions do FHA loans.
Home buyers with mortgages backed by FHA will soon see a rise in fees, the agency announced Feb 27, 2012. The agency is raising its fees in an effort to try to recoup some of its depleted reserves, which suffered from the rising number of homeowners who defaulted on their mortgages. The agency also says its raising fees to try to encourage the return of more private capital to the market.
In particular, FHA will increase two fees that borrowers pay. Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500, bringing the total cost from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount, The New York Times reports.
FHA also announced it will raise a fee for the upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount.
For example, a borrower with a 3.5 percent down payment with a mortgage of $100,000 can expect to pay an upfront mortgage premium alone of $1,750, compared to the prior $750. This just one example of the costs that are rising as the banks try to re-coup their costs. Buying a bit earlier this strong that later will save you 1% of the purchase price…. But as always, have your trusted real estate advisor explain all of the specifics for each deal so you are fully in the know, as no matter how many homes you may have purchased in the past, today is a world where having someone in your corner is a very good thing.
May the market be with you.
FHA Costs on the Rise…
FHA Costs on the Rise…
Tornado impact will still be felt in months to come…
The Real Story…
News and commentary about the real estate market and related topics.
Dave Parrish, ABR®, CSP, GRI, ePRO®,REALTOR ®, RE/MAX MarketPlace
The opinions expressed here are my own and don’t necessarily represent those of RE/MAX International.
Tornado impact will still be felt in months to come…
As the tornados ripped through our community during the early morning hours of January 23rd, they not only killed two but also wrought much damage and impacted many families directly in the loss of property including the total destruction of more than 200 homes. In viewing the devastation of the storms, it truly seems a miracle that no more than two were killed by their indescribable power, which caught so many in the middle of their sleep.
The immediate response by members of our community to help wherever possible was not a surprise…. Nor have those efforts and prayers ceased. While the immediate needs of those directly affected may be for the most part met, we are a long way away from recovering from those storms and feeling the end of the ripple effects they will have on our community in the months to come.
While certainly not trying to minimize the emotional impact that these storms have had and will continue to have, there is also a significant impact on the local real estate market. The most immediate of those is the impact on rents.
Pressure on rents has been increasing over the course of the last several years as the impact of the economy has spread to so many families moving them from homeowners to tenants. With occupancy rates already in the 98-99% area, we have seen a slow but steady increase in almost all rental prices. The added pressure from those families most directly impacted by the storms (either by the fact that their homes were totally destroyed or significantly damaged making them uninhabitable) will put even more pressure on rents, which will most likely rise quickly and then be much slower to a return to “normal” levels.
A second impact is that not all homes destroyed or significantly damaged will be rebuilt or repaired within a sufficient time frame to save them from further deterioration or destruction. This will occur for two major reasons. First is the issue of non-insurance and under insurance of homes and secondly because the payoff for some homes will be seen as an opportunity to move-on to greener pastures.
Those vacant lots left behind (after they are cleared of debris) not to mention the loss of vegetation will become a blight on some neighborhoods that could drop the market values of homes in those neighborhoods significantly. With that possibility in mind, I do hope that the powers in charge will keep a watchful eye out for abandoned properties and develop some plan for the re-greening of the affected neighborhoods.
On a more positive note for those not impacted by the storms who are looking to sell: You should note that on the day the storms struck we were near a five year low of homes on the market. We are now facing a potential increase of persons looking to buy within from sixty to ninety days out. While this increase in demand may not necessarily translate to a higher market price, it should aid in producing a potentially quicker sell of your property, as long as you follow all the other rules of making your property move-in ready and attractive to prospective buyers.
May the market be with you.
