Foreclosures Remain on Hold…

Posted on October 21, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Foreclosures Remain on Hold…

Last week’s story continues… Freezing of Foreclosures in the marketplace.

There seems to be a rash of commentary about how bad freezing foreclosures could be for an already troubled real estate market. While there is some validity to those arguments, the impact of the freeze as it is currently defined will probably have no more impact than the lull in the market created by that 90 day period following the end of the Home Buyer Tax Credit and certainly not as much as the crash of the financial markets in October 2008.

The proposed 30-60 day freeze (still voluntary in Alabama) will in fact have little impact on the overall market as the glut of foreclosures will continue for several more years (my best guess is at least 24 months following a drop in the unemployment rate below 6%). The major impact will be felt by purchasers of foreclosed properties in the 23 states directly impacted by the court ordered mandate to evaluate documents prior to proceeding with the foreclosure process. Also effected are the foreclosures held by the companies like Bank of America that entered into a voluntary stay of foreclosures in the remaining 27 states.

That impact will be felt in terms of delays in closing the purchase transactions. The ability to wait out the process will be paramount… but then that seems to have been the case in many foreclosure transactions for the past 18 months. Many buyers will simply be unable to delay their purchase and will move on to non-foreclosure properties.

The powers-that-be seem to have indicated their unwillingness to mandate any prolonged stay of foreclosures, as it will have little if any impact on the actual outcome. With that in mind, I am wondering what the government will do to keep the lenders honest. I remain concerned about a fair and equitable process… I see no real winners in the foreclosure mess as it exists today; although, the big boys of banking do seem to have a leg-up on everyone else.

On the up-side, homeowners who are trying to sell their home and having to compete against the foreclosure inventory may find some temporary relief as the foreclosure inventory is in this hold pattern. My advice is don’t waste this opportunity.

There have been many changes in the real estate and home mortgage fields over the past 24 months. All seem to have fallen short of making a balanced and meaningful change in the process other than eliminating much of the aid for the weak-side of the market. The pendulum still swings wildly to extremes!

By far the most important issue in terms of the health of the Real Estate market is a reduction in the unemployment numbers and elimination of organizations too big to fail that require government assistance to survive the effects of their own avarice… Again I repeat my call for regulations that favor the small community banks of the mammoth organizations that seem inclined to operate solely in the interest of profit and using the shield of inter-state commerce to protect themselves from usury laws. While small community banks may still operate chiefly in the interest of their shareholders, they do come under the scrutiny of local regulation and if not serving their communities effectively are certainly not too large to fail.

May the Market be with you.

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Freezing of Foreclosures…

Posted on October 14, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Freezing of Foreclosures…

It’s the story of the week… maybe the month. Foreclosures halted in 23 states due to the “robo- signing” scandal and the exposure of a corrupt process… Bank of America’s decision to freeze foreclosures in all 50 states pending their completion of a review, the call for all major lenders to suspend foreclosures until completion of the review of the process. Proposed congressional hearings in November (after the election) to look into the irregularities associated with the foreclosure process.

The impact of this new flavor of the housing crisis is potentially huge, so we are being told… It is certainly true that freezing foreclosures will extend the time period to put their impact on the market behind us. At the same time, what appears to be a disregard for due process and honesty speaks profoundly of a sort of bankruptcy of the banks who were themselves saved by the intervention of the government.

The apparent ineffectiveness of the Home Affordable Modification Program (HAMP) is at least in part due to the mortgage servicing companies’ ability to charge higher fees for processing foreclosures than doing loan modifications. How many people will be helped by the freezing of foreclosures will likely be small. Even so, we owe it to ourselves to ensure that the process is at the very least fair and legal.

We’ve been told: When written in Chinese the word crisis is composed of two characters. One represents danger, and the other represents opportunity. While the accuracy of this translation may be in question, perhaps we can use this moment to evaluate the environment that seems to repeatedly bring about crisis.

Perhaps this time our leaders can take steps to truly ameliorate the banking environment to better serve the nation and its people. I would suggest that as part of the overall solution to the misconduct and abuses of the huge national banks and the jeopardy that hey have brought to our economy that we consider incentives that would help support small local banks with a truly vested interest in their communities and local accountability.

May the Market be with you.

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Predicting the turn of the market…

Posted on October 7, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Predicting the turn of the market…

Whether you are looking at the real estate market as a buyer or a seller… an investor or a homeowner, there is the desire to know where the market is and how soon will it turn. As a pilot and sailor, I can tell you that turns are setup and begin before the results of those forces become visible. And so it is with the real estate market.

It has been said (although the origin is in dispute) that a picture is worth a thousand words. With that in mind consider the graphic here that shows a trend that you’re not hearing about in the national news.

Housing Market may be bottoming out

Housing Market may be bottoming out

The 20 Cities: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, Washington

It is interesting to note that the 20 cities include some of the cities known to be the worst-of-the-worst real estate markets in this period of crisis… the first to enter the depths of the real estate crisis.

Could it be that these cities are like the canaries in the mine… the early warning of danger and perhaps opportunity as well.

Having said that, I must add that real estate is hyper local. Knowledge of national trends does not replace the need to know the local trends and market conditions. However, they can be signs of things to watch for… perhaps an early warning system of sorts.

A useful site to visit if you’re interested in getting real and hyper local market information about your neighborhood is:

http://HomeValuesInTrussville.com

Now as usual, I’ll tell you that The Real Story is almost always more complex than a single fact. And so it is again this week.

Historically Low Mortgage Rates

Historically Low Mortgage Rates

Rates for a 30 year fixed rate mortgage in Alabama (Yes, these rates do vary from state-to-state) on October 1, 2010, were between 4.25 and 4.5%. This is more than a full percentage point cheaper than they were a year ago.

A 20% reduction in rates… provides a corresponding increase in buying power for the same monthly payment.

When qualifying for a home purchase the factor that ends up being the driving factor is how much will your budget allow for housing. Now that number really isn’t an arbitrary number. It will usually be the number that the lender approves as the amount of monthly debt they will allow you for the purchase of a home. Let’s say that number is $1000 per month.

At last year’s prevailing rate of 6.0% that $1000 monthly payment amount would mean that the lender would pre-approve you for a home purchase of $132,000 (Our pricing assumptions here are based on Trussville Tax District Millage Rates and market rates for full homeowners coverage / hazard insurance). At today’s prevailing rates of say 4.5% the same $1000 monthly payment would allow you to qualify for a home loan of $152,500. Do you think the extra $20,000 would buy you more of what you’re looking for?

At this time the Federal Reserve has stated that it does not plan to modify its monetary policy impacting interest rates prior to end of the first quarter of 2011. So, it is anticipated that interest rates will remain at the current historic lows through that point.

While market prediction is largely a fool’s game, these low interest rates along with the low prices in the market coupled with the trend toward market stabilization as suggested by the latest S&P Case Shiller indices seems to indicate the perfect storm for the prospective home buyer. How long that window will remain open remains to be seen, but it does appear that the winds are at least beginning to change directions.

May the Market be with you.

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Fannie Mae Offers New Incentives…

Posted on September 30, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Fannie Mae Offers New Incentives…

Yes the Tax Credits are gone (except for returning vets* see note below) but in an effort to move its huge inventory of “re-claimed” properties, Fannie Mae announced new incentives for buyers and selling agents of its homes.

As of Fannie Mae’s latest quarterly report (June 30, 2010), Fannie was holding a burgeoning inventory of 129,310 properties.

The company acquired 68,838 single-family real estate owned properties through foreclosure in the second quarter of 2010, compared with 61,929 in the first quarter of 2010. As of June 30, 2010, the company’s inventory of single-family real estate owned properties was 129,310, compared with 109,989 as of March 31, 2010. The carrying value of the company’s single-family REO was $13.0 billion, compared with $11.4 billion as of March 31, 2010.

Source: Fannie Mae Quarterly Report June 30, 2010.

In an effort to right the ship, Fannie is offering the following incentives to Buyers of their homes (their foreclosures) and to the agents selling the homes:

Qualified homebuyers who will be owner-occupants can receive up to 3.5 percent of the final sales price that can be used toward closing cost assistance, including a home warranty, if available. In addition, selling agents representing owner-occupants will receive a $1,500 bonus.

To qualify for these incentives, eligible offers must be submitted on or after September 23, 2010, and must close by December 31, 2010. The sale must close within 60 days of the offer being accepted.

Picture of the "Gingerbread House" i...
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For a list of eligible properties visit Fannie’s REO website, HomePath.com.

HomePath properties are owned by Fannie Mae and include a wide selection of homes, including single-family homes, condominiums, and town houses. HomePath properties may also be eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing.

Now there will doubtless be a stream of critics of this program claiming that this is simply another government bailout or it will falsely create activity in the market place only to cause a period of inactivity thereafter. In truth, neither is true.

Fannie Mae, as a private company (although a recipient of government supports), is simply acting, as all sellers in this market must and do, to attract sellers. The fact of the matter is that there is absolutely nothing out of the ordinary about a seller paying up to 3.5% in closing costs for a purchaser in today’s market. As a matter of fact, I don’t think I’ve done more than three deals this year in the re-sales market that didn’t include sellers’ assistance for the purchasers’ closing costs and pre-paid items in an amount around the 2.5 – 3.5% arena. At the time of writing this, I have been unable to determine if Fannie will automatically include pre-paid items… but I know that we have negotiated them in the past.

Here’s the Real Story: Fannie is offering incentives to selling agents (those agents who bring a buyer to the table)… A $1500 bounty! They are trying to get agents to show their homes… to sell their homes over the competing properties. This too is not an unusual thing in today’s market.

In a market where so many agents are struggling for survival, this incentive can be a powerful inducement to hungry agents to steer buyers toward Fannie Mae properties. So my advice is don’t buy a home without representation… but interview your agent well… be sure that he/she is working for you! If you are working with an agent under a Buyer’s Agreement that agent is required by law to put your interest above the interest of all other parties, including their own!

May the Market be with you.

* Armed Services Veterans returning from Afghanistan and Iraq have until April 30, 2011 to exercise the tax credit that expired for all others on April 30, 2010.

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Fannie Mae Offers New Incentives…

Posted on September 25, 2010 by admin

News and commentary about the real estate market and related topics.

Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Fannie Mae Offers New Incentives…

Yes the Tax Credits are gone (except for returning vets*) but in an effort to move its huge inventory of “re-claimed” properties, Fannie Mae announced new incentives for buyers and selling agents of its homes.

As of Fannie Mae’s latest quarterly report (June 30, 2010), Fannie was holding a burgeoning inventory of 129,310 properties.

 

 

 

 

In an effort to right the ship, Fannie is offering the following incentives to Buyers of their homes and to the agents selling the homes:

Qualified homebuyers who will be owner-occupants can receive up to 3.5 percent of the final sales price that can be used toward closing cost assistance, including a home warranty, if available. In addition, selling agents representing owner-occupants will receive a $1,500 bonus.

To qualify for these incentives, eligible offers must be submitted on or after September 23, 2010, and must close by December 31, 2010. The sale must close within 60 days of the offer being accepted.

For a list of eligible properties visit Fannie’s REO website, HomePath.com.

HomePath properties are owned by Fannie Mae and include a wide selection of homes, including single-family homes, condominiums, and town houses. HomePath properties may also be eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing.

Now there will doubtless be a stream of critics of this program claiming that this is simply another government bailout or it will falsely create activity in the market place only to cause a period of inactivity thereafter. In truth, neither is true.

Fannie Mae, as a private company (although a recipient of government supports), is simply acting, as all sellers in this market must and do, to attract sellers. The fact of the matter is that there is absolutely nothing out of the ordinary about a seller paying up to 3.5% in closing costs for a purchaser in today’s market. As a matter of fact, I don’t think I’ve done more than three deals this year in the re-sales market that didn’t include sellers’ assistance for the purchasers’ closing costs and pre-paid items in an amount around the 2.5 – 3.5% arena. At the time of writing this, I have been unable to determine if Fannie will automatically include pre-paid items… but I know that we have negotiated them in the past.

Here’s the Real Story: Fannie is offering incentives to selling agents (those agents who bring a buyer to the table)… A $1500 bounty! They are trying to get agents to show their homes… to sell their homes over the competing properties. This too is not an unusual thing in today’s market.

In a market where so many agents are struggling for survival, this incentive can be a powerful inducement to hungry agents to steer buyers toward Fannie Mae properties. So my advice is don’t buy a home without representation… but interview your agent well… be sure that he/she is working for you! If you are working with an agent under a Buyer’s Agreement that agent is required by law to put your interest above the interest of all other parties, including their own!

May the Market be with you.

 

* Armed Services Veterans returning from Afghanistan and Iraq have until April 30, 2011 to exercise the tax credit that expired for all others on April 30, 2010.

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Is Homeownership Still Worth It? (conclusion)

Posted on September 22, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Is Homeownership Still Worth It? (part 3)

Continuing our conversation from the last two weeks… In part 1, I reviewed the value of home ownership as an investment and then in part 2 we reviewed the counter position to the statement that: “Buying a home is really just renting.” If you missed either of those conversations, be sure to visit my blog at www.DavidParrishRealtor.com/myblog if either of those topics interests you.

For the moment we are still going down the list of reasons given for why home ownership may not be worth it.

Reason number 3: Today’s generation is nomadic; owning a home for many is just an unwanted anchor.

Of all the arguments posed this one will probably resonate with more than any other… I know that I certainly understand and appreciate the sentiment expressed. To quote one of my favorite poets and songwriters: “Times they are a changing.” What’s changing is perhaps not so much the yearnings of youth as the opportunities for them. It seems we have always been a nation of opportunists… a people looking for a better life… and let’s face it: life almost always looks better someplace where you are not.

Then there is simply the desire to explore and discover. I know that all three of my children have had that wanderlust and have acted upon it… they remain scattered across the country! There is also the fact that many elect to postpone marriage and putting down roots until much later in life than did my generation… That too is probably a good thing.

In the end the vast majority end up settling down in some place… It may not be the place from which they started… but it is their place… a place they call home. Our challenge is to create a place with opportunity and an inviting environment that someone would want to call home. To the extent we are willing to commit ourselves to that end, we create communities that can weather the storms of changing times. So I see this statement as a challenge to do just that; not a reason to abdicate the principle essential to building neighborhoods and communities.

Reason number 4: If you can’t sell it, it’s not an investment.

So we’re down to that last point… Sounds very similar to the first. But, let’s look at it again.

You’ve heard this here before… even so, I will repeat it. Every home will sell for the right price! If you can’t sell it, your price is too high for what you are offering to the market. The market makes the price, the seller doesn’t. You may decide you won’t sell for less, but if that is more than the market is willing to pay, you won’t sell… but that choice not to sell was yours. This really is the case with all investments.

Take for instance the purchase of stock in a corporation. Let’s say you purchased 100 shares of Goldman Sachs in September of 2007 the price would have been around $180 a share give or take a dollar depending on the time of day. Now let’s say you decided to sell this stock in October 2008 (just a bit over a year later)…. Let’s say you were holding out for your original investment… Do you think you would have been able to sell it when everyone else was selling for under $20? Was the stock selling then? Did the stock continue to sell? Is the stock selling today? (Answers: No. Yes. Yes. Yes.).

Did your purchase cease to be an investment just because it was loosing money? No.

Did you loose money? Only if you sold then… If you continued to hold the stock it would have recovered a good bit but not all of that ground… At market close on September 3 the price for a single share of Goldman Sachs was $147.29. I am hoping you see the irony here!

The point is that an investment does not cease to be an investment simply because you can’t recover your investment at a given point in time or at all.

One more stock market example: I mentioned in a previous conversation something about 20,000 shares of Bruno’s stock. Brunos (the company that purchased this thriving business not the family) went into bankruptcy, re-organized to stay in business and left thousands of shareholders like myself out in the cold… The stock could not even be sold… there was no market. In real estate, you own a real asset not just a symbol of an asset. There is almost always some residual value, because it is real.

To the extent that your purchase of real estate is an investment, it is your duty as an investor to watch and understand the market and make the decisions that are appropriate for your family and that investment. In the realm of real estate that will include your care of the property and the community in which it resides.

Historically, real estate has been among the most forgiving of investments and simultaneously offered shelter for our families and security to our society. It is really only one a few ways that most people can participate in our Capitalist system other than as a consumer of goods, so that the system works for us. We are in a down market… there are investors, homeowners and those who wish to be homeowners ready to take advantage of that market.

May the Market be with you.

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Is Buying a House Really Just Renting?

Posted on September 16, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Is Homeownership Still Worth It? (part 2)

Continuing our conversation from last week, I ended last week with what some might call a bit of a rant on the value of home ownership as an investment (if you missed that, be sure to visit my blog at www.DavidParrishRealtor.com/myblog ). As I said last week, the primary reason for home ownership isn’t for its value as an investment. But, more on that later… For the moment we are still going down the list of reasons given for why home ownership may not be worth it.

Reason number 2: Buying a house is really just renting. On its face that ‘s just a silly statement!

Regardless let’s take a look from the author’s point of view. If you rent a home you don’t pay for the upkeep of the home, or the taxes, or the insurance… without equity appreciation, you’re better off to have just rented. Really!

Do you feel it coming? Another rant from the Realtor ® and homeowner of not one but six homes during the past 40 years.

Let me begin with a request that we not forget history here. How many years have home values fallen versus how many years have they risen. Markets run in cycles… The housing market is no exception. We are experiencing a market correction following a totally unrealistic period of growth. The sky is not falling … Chicken Little… No, it’s not the time to sell; unless, you have no other options or you’re planning on moving up and taking advantage of bigger savings on your purchase than the losses incurred on your sale.

I bought my first home in 1970. Moved from an apartment in East Lake (77th Street and 5th Ave North) where I was paying $75 a month rent. I bought a new home in Pinson on Oak Lane for $27,500 my monthly payment was $135 a month if I remember correctly. I sold that home in 1974 for $55,000 (less the Realtor ® commission, which I gladly paid!)… Nice little profit… but we were in a period of double-digit inflation, 10% interest rates for a 30 year mortgage and the expectation of at least a 10% annual pay increase for acceptable performance. Yea, yea it was a different day… but I don’t see many people wanting to go back.

Back to the author’s point of view. I was looking at property in that very same neighborhood just last year. The property we were looking at sold for $106,000. One of those homes is on the market today for $159,900. Probably a little high… The indicated market price would be more on the order of $140,000 to $150,000 tops.

There are at least 4 families living in that neighborhood today that lived there when I did. Assuming that they did not refinance or use their homes as a piggy bank, those homes have been mortgage-free for 10 years now. Yes they still have to pay taxes $600-$700 per year and I’m betting they’re paying for homeowners insurance another $700 per year. So their monthly housing expense (rent if you will) would be around $120 per month plus maintenance.

If you were to rent a home in that neighborhood today, it would cost you between $800 and $900 a month. If you purchased a home in that neighborhood your monthly payments would be between $600-650 per month including taxes and insurance. Oh by the way, the same apartment in East Lake that I was paying $75 a month for now rents for $400 a month. You see rents are not frozen in time. And landlords don’t rent without taking in consideration those same taxes and insurance the author says the renter need not be concerned with. Really… so who do you think pays them?   Believe me, those expenses are part of the rent… a portion for which the owner receives a tax deduction… not the renter.

You’ll note that none of these numbers reflect the tax advantage experienced over time by those homeowners while they were paying for their homes. Not inconsequential during the early years of a mortgage. Yes this is a form of subsidized housing! I hear the shouts of communism and socialism echoing in the hallways!

Introduced with the Income Tax in 1913, the Mortgage Interest Tax Deduction was introduced for a number of reasons… First for political reason… We Americans have always hated the idea of being taxed… so it was a way of appeasing the masses by at least exempting some income from the tax burden. But there was more than just that effort to ease the burden on the common man… Oh by the way in 1913 home ownership rates were rather dismal.

There is this principal of “Enlightened Selfishness / Self Interest” at work here. Those with a vested interest in the status quo are more likely to support the status quo… Involvement and inclusion are antidotes for anarchy… thus the building of a middle class.

The “American Dream” is many things… it is something different for everyone… But when you survey Americans about their American Dream and really think about their responses you see the common thread of independence… and self-reliance. Not being at the mercy of a landlord by owning your own home is a common expression of the American Dream… a step toward economic independence and control of our destiny.

So is renting the same thing as buying… I really don’t think so… What about you?

I’ll do my best to wrap this discussion up next week, until then…

May the Market be with you.

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Is Homeownership Still Worth It?

Posted on September 9, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ® RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Is Homeownership Still Worth It?

I was in the dentist office first of the week and while waiting to be seen, I spotted in the magazine rack across the room a weekly news magazine with the headline… “Rethinking Home Ownership: Why owning a home may no longer make economic sense.”

You know I had to pick that one up and read! Always interested in hearing an opposing view!

So where to begin… First the arguments posed against home ownership:

  • Stock Market averages a better return over time than an equal investment in the housing market.
  • Buying a house is really just renting.
  • Today’s generation is nomadic, owning a home is for many just an unwanted anchor.
  • If you can’t sell it, it’s not an investment.

In fear of going way too long here, I’ll try to be succinct and to the point.

First a confession, not only as a Realtor ® but as a homeowner who has benefited from homeownership multiple times, I am biased here. My experience in both the stock market and the housing market yells out… What we see here is a collection of half-truths.

Price-Earnings ratios as a predictor of twenty...
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While I disagree that the primary reason to own your home is for investment purposes… I do acknowledge that it is not a reason to be ignored. So let’s take a look at the Real Story when it comes to real estate as an investment opportunity.

Unless you’re buying on margins (generally a proven path to disaster for the uninitiated or those of the working class) you will be unable to make a leveraged investment in almost any investment instrument other than real estate. That means that to participate in an investment you must first have money to invest! Most Americans do not have a sufficient surplus of funds to become involved in investing in any other fashion than via real estate… that is by way of home ownership.

While it is actually possible to buy for zero down in some situations, let’s stay with the more conservative scenario available to most buyers. With the purchase of a home the average buyer can control an asset with as little as 3.5-5% of the value of the home. For example a $100,000 asset can be controlled with as little as $3500 – $5000. Now it is true that if the home’s value does not appreciate (increase) there will no be no return and actually a loss that is also leveraged could be experienced. So buying wisely is of huge importance… just as it is when investing in the stock market. One of the many reasons a buyer should not purchase without the use of a trained and experienced professional (end of commercial).

As with all investments, markets run in cycles. There are times to buy and times to sell. Market timing has always been problematic regardless of the market you’re dealing in. Let me tell you about my 20,000 shares of Bruno’s stock… or perhaps you would like to tell me about your 401k. Seems that we only know when the best time to do buy or sell is when the peak opportunity has already passed… again true with all markets.

I will say that short-range investments tend to be riskier and do require greater expertise to be profitable. The average homeowner will have a difficult time recouping their costs/investment in periods less than about five-to-seven years, due to the fees associated with acquiring and selling. Although, I know folks going against the grain of the prevailing logic and making quite a nice living flipping homes… still. There are of course exceptions to every rule… But here we want to deal with the normal experience.

When housing values were at their peak about 4 years ago… The same experts who are now telling us to reconsider our view of home ownership were pushing the housing market… In a seller’s market where prices were increasing around 10% a year at terms favorable to sellers not buyers! Only a few voices were urging caution.

I don’t know about you; but, Warren Buffett and I agree: buying low and selling high are proven ways to make a profit. Housing prices in our market are down an average of 15-20% from 2006 prices in most neighborhoods… Are they as low as they will go… probably not!

My read, based on near constant study, is that we will bottom out somewhere between mid 2012 to mid 2013. But, neither you nor I will know that we’ve bottomed out until the bottom has passed and prices are on the rise. So basing your decision on being at the bottom of the market will always be a gamble.

What should be equally considered are the other costs associated with the investment. Chief among these are the cost of money… that is the interest rate you will pay for the leveraged portion of your investment otherwise known as the mortgage. Today’s rates are at historical lows. The Fed has said they will hold the line for a while… probably through the end of the first quarter of 2011.

As an investor you’ll want to parlay these two factors to your advantage to get the real best deal!

Admittedly the following is anecdotal… But I’ll remind you that I’m no Warren Buffet and I have been successful in real estate investment… Just to cite one example… I purchased a rental property in 1995 for $38,000… It took a $4000 investment and some guts to get started. Over time, we’ve made $17,000 in repairs/improvements and paid the house off. It currently would appraise for $150,000 down from the $185k it would have brought three years ago… Have I lost $35,000? Or have I made $95,000. Truth is neither! I won’t know what I’ve made or lost until I sell it. But until then I‘ll just keep depositing those $750 rental checks each month!

We’ll continue this discussion next week… until then…

May the Market be with you.

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Everybody wants a deal…

Posted on September 2, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.

Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth
The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Everybody wants a deal…

Advice for Buyers: In this Buyers’ Market everybody is looking for a deal… It makes no difference what neighborhood or price range… everybody wants a deal!

So here’s the deal: Homes will always sell at market value. Market value is determined by what a buyer is willing to pay.

You… the buyer… are the market.

As previously stated here, the value of a home has nothing to do with what the owner paid for it, has invested in it, needs for it or any of those other common justifications made for why they are convinced that it will sell for more than market value.

Market value varies based on the buyer population and desires. It is not a fixed, rigid price, but instead is a range of value. This is because no two buyers are alike. While one must have a pool, another will consider a pool a liability. What one buyer loves turns the next buyer off.

“Low-ball” offers are becoming the norm of the day. The term low-ball is generally defined as the deliberate underestimation of cost or value… or in other terms an offer significantly below the seller’s asking price. However, low-ball offers are not always the best path to getting a great deal.

Negotiating the offer…

Unless your goal is to accumulate a stack of rejected offers you will one day share with your grand-children, it is important to remember that you are offering to purchase a home. A home, unlike a bushel of corn, a pound of beef, or a ton of sand, is inherently emotional.

So, it is helpful to keep in mind a few dos and don’ts when creating and presenting your offer:

Do know the seller’s circumstances. Obviously, knowing the seller’s circumstances will not always be possible. However, it doesn’t hurt to ask about those circumstances before considering your offer. It’s truly surprising what you (or your agent) can learn by simply asking a few questions. Does the seller simply “want” to move or do they “need” to move? Is there a real driving motivation, or is he just thinking of moving to the beach if he can get “his” price? Circumstances will dictate whether there is a bargain on the horizon, and knowing this in advance can save everyone time and frustration.

Do get personal. Presentation of the offer can be a key to successful negotiation. Putting a personal face on the offer can make a seller consider your offer in a totally different light. For that reason, I suggest writing a cover letter to be submitted with your offer (or even better presented by your agent) that tells the seller why you believe this is the right home for you.

I have seen sellers accept a lower offer because they felt a connection with the buyer. Does the seller have a cat? It might not hurt to mention that your own Angel will just love this new home, as well. The seller raised his children in the home? Why not mention how much your children will enjoy having their own space? It may not help, but it can’t hurt.

Don’t offend. Unless you are making an offer on a property that has been held purely for investment (this includes foreclosures and short-sales), the seller is emotionally invested in his property. Negative comments (regardless of their accuracy) of the seller’s home are not a winning strategy. Even in this market, negative statements about the property whether spoken or written into the offer can arouse the emotions of the seller creating a negative response.

Don’t criticize the seller’s price. Your agent has given you information on comparable property sales. Sharing your mountain of information and a 50 page CMA (Competitive Market Analysis) will not endear you or your offer to the seller. Your offer speaks for itself. The seller has set a price, probably after having taken this same information into consideration. You may believe his price to be high, but it is his price. Insulting his intelligence or sense of reality further will not further your cause.

Don’t defend your offer the wrong way. Saying it is all you can afford or that you are basing it on what you believe values will be during the next quarter century. Such explanations of your offer will likely leave the seller feeling that there is a buyer out there, other than you, who can afford his home and at the price it is worth today.

Don’t be unreasonable. There are offers, and then there is the “what’s he smoking” offer. If a home is offered for $X, and you are willing to pay 10% less, do not offer X minus 20% and then ask the seller to throw in the bedroom furniture, refrigerator and ski boat. You will not be taken seriously. Is this already the lowest priced home in the neighborhood? Is it already a good deal?

Do be prepared to negotiate. No buyer wants to think they paid too much, and no seller wants to think he sold out to cheap. Expect to go a round or two. “Take it or leave it!” offers are rarely met with smiles or high-fives from the seller, even in this market. In negotiations, everyone wants to feel like they were in control and that they prevailed. Work toward a win-win feeling through out the process to achieve the best result.

The market is filled with great opportunities for the buyer. Great values… Values relative to prices a year or two ago are common. But, ridiculously great “deals” are needles in the proverbial haystack. Because market value will always be determined by what a buyer is willing to pay. That buyer might be you, but if you are unrealistic or even simply careless with creating and presenting your offer, it will probably be someone else.

It is a great market… for the buyer who is looking for great value but who also is willing to work the offer process in a manner that lets the seller feel like a winner too.

May the Market be with you.

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Reality 2.0

Posted on August 25, 2010 by admin

The Real Story…

News and commentary about the real estate market and related topics.
Dave Parrish, ABR®, CRSA, CSP, GRI, ePRO®,REALTOR ®, RealtySouth

The opinions expressed here are my own and don’t necessarily represent those of HomeServices South.

Market Conditions Update…(Reality 2.0)

Since the expiration of the First-time Buyer & Move-up Buyer Tax Credit program, traffic in the real estate market has been slow… But then that’s not a huge surprise. While the tax credit certainly caused some people to buy that otherwise may not have, it by enlarge was an incentive to act within a certain time period. To that end it was successful…The buyers of Summer bought this Spring! So summer traffic has been slower than usual… though not substantially slower than expected.

The consensus has been that traffic would pick-up this month (it’s that pent-up demand thing)… and indeed traffic has been more brisk than it was in the May, June, July period. However, sales aren’t being consummated, as it seems everyone needs to sell before they can buy! The chicken and the egg thing!

Homes are still selling albeit at lower and lower prices…

While sellers have begun to be more realistic about pricing their homes based on the market, prices have continued to fall… and there is no logic that would lead me to predict that the fall is over. It has however become less of a steep fall that it was in 2008 & 2009.

Even so, there continues to be pressure on pricing caused by:

  • More foreclosures & Strategic Walk-A-Way’s,
  • Appraisal pressures (tracking the market)
  • High supply, low demand!

The most likely thing to change this trend is  J O B S!

New housing starts are still at near an all-time low, which means that discounts on new homes is considerably less than on re-sale/existing homes due to the low inventory for a buying public that still seems to favor new over previously owned. It’s the supply and demand thing!

Interest rates are incredible… low 4’s for good credit on a 30-year mortgage! Now folks are saying rates might go a bit lower… But don’t wait… this won’t last forever. They are already at historic lows!

It’s definitely a Buyer’s Market… Great rates, low prices, large selection, favorable terms. They just need to buy!

And buy they will because most people buy because they need to… due to:

  • Changes in family status: Marriage, Divorce, Birth, Death…
  • Job Transfers,
  • Health and safety issues
  • Better school system, neighborhood
  • Substantial changes in economic situation

Long term, the outlook is that we are likely to see more of the same through 2013. Followed by a relatively flat market, then a period of slow growth 2-4% appreciation rates. Based on that outlook, it would look to be near 2020 before housing values return to Today’s level.

Now many may say I’m really being a “downer” here… But the truth is you want the Real Story not some watered-down Pollyanna version of what’s going on in the market. Armed with this truth you will be able to make the decisions that a right for you!

May the Market be with you.

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