David Parrish Realtor

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…

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.

How’s the market is the question everybody is asking… Following that is: When will the market recover? While the question is frequently asked, I never tire of looking for indicators of a recovery and sharing my insights.

There has been a barrage of positive reports as 2011 came to a close and we began a new year entering into what is now the sixth year of market contraction in the housing market. With a national increase of 5% in units sold during 2011, many are proclaiming 2012 the year of market recovery. I, however, have serious doubts that these wishful thinking market cheerleaders are accurate.

Now don’t get me wrong… I too am wishing for a market recovery… I have however learned that what I want and what I get do not always coincide.

While it is certainly encouraging that the number of units sold last year increased over the dismal numbers of 2010… and further, that New Housing Starts are expected to increase in 2012, those increases (real and projected) do not tell the whole story.

While it is certainly encouraging that inventory levels in the Birmingham MLS Market have, for the moment, fallen to below 10,000 units, the number of units (homes) sold in the Birmingham Market increased only 1% as compared to the National rate of 5%.

Even as you look at the improved sales numbers, when we look at sales as compared to inventory we saw a modest increase in months of inventory from 2010 to 2011 (not the direction we wish to travel in). Then there is the price received as a percentage the last list price for homes that moved from 94.94% in 2010 to 94.79% in 2011… again wrong direction. From December-to December we did see a drop in the months of inventory on the market from 11.49 to 10.74 months… a move in a positive direction… albeit probably a very temporary improvement.

All in all it feels very much like we are either approaching or bumping along the bottom of the market in what is likely to be a very wide valley.

Rather than looking solely at history, perhaps it would be useful to look at what is going on at the present that will impact the future movement of the market. Perhaps more important than last year’s sales numbers and far more indicative of market direction, the rate of mortgage delinquencies points to an ever increasing inventory of homes on the market many of which will be distressed properties adding to the downward valuation of homes.

The one thing that might have some middle-term impact on this erosion of market value is a movement by lending institutions and investment groups to convert the huge inventory or REOs (post foreclosure properties) to rentals. The advantage of such a move would be to arrest the physical decline of unoccupied properties and thus slowing the erosion of property values while responding to an ever-increasing shortage of rental properties, a market segment where we have been seeing substantial increases.

All that said, the most important of all factors to remember is that these national statistics really provide little useful information to you the individual reader… for you see all Real Estate is LOCAL!

The Birmingham Market is literally made up of hundreds of micro markets, each with its own set of dynamics to be understood to be able to answer your questions about market conditions in a meaningful way.

Therefore, to get a meaningful answer to this question for any particular individual market (unless you are a macro economics aficionado) the person providing you with their insights should be asking the question where do you live or which market are you wanting an answer to for that question.

If you’re looking for answers to that question for any of the Birmingham Metro Markets you can get answers targeted to your specific neighborhood at www.HomeValuesInTrussville.com … Note that this site let’s you define by address the area / neighborhood that you are interested in market conditions… Furthermore, it does include the ability to see more than neighborhoods in the Trussville Market… So take a look at the facts for yourself…

And as always, if you need any help determining the meaning of that information drop me a note or contact a Trusted Realtor Professional familiar with your specific market.

 May the market be with you.

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.

Waiting until Spring to list?

Thinking about selling your home… But waiting until spring to list?

Many sellers want to wait until the spring before putting their home on the market. This might be for any of several reasons:

1. They don’t want to be inconvenienced during the holiday season.
2. They believe that they will see more potential buyers and as a result will get a higher price.

In a normal real estate market, this may make sense. However, this market is anything but normal. This spring will also see some abnormalities. The biggest difference will be the direction prices will take.

In years past, the spring market would favor the seller because increased demand would outpace any increase in supply: the number of houses coming onto the market would not be as great as the number of buyers newly entering the market. In most situations, when demand is greater than supply, prices increase.

Late last year, banks were warned that they needed to guarantee that the paperwork necessary to start a foreclosure process on a family was both accurate and complete. Since then, the banks have slowed down the foreclosure process while they re-examined their procedures. They are now confident that all the required documentation is in order. We are currently waiting on a settlement between the banks and the state attorneys general that will establish what penalties will be assessed.

Once this settlement is reached, the banks will again move forward on many homes that are currently stalled at some stage in the foreclosure process.

In it’s September report, RealtyTrac explained:

“U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork. While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up.

In November, RealtyTrac’s U.S. Foreclosure Market Report™ for October 2011, reported:

…foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 230,678 U.S. properties in October, a 7 percent increase from the previous month, but still down nearly 31 percent from October 2010… “The October foreclosure numbers continue to show strong signs that foreclosure activity is coming out of the rain delay we’ve been in for the past year as lenders corrected foreclosure paperwork and processing problems,” said James Saccacio, chief executive officer of RealtyTrac.

How many homes are we talking about?

There are millions of homes in this category. In August the Calculated Risk Blog (http://CalculatedRiskBlog.com) quantified the situation:

“There are a large number of seriously delinquent mortgage loans in limbo waiting for this settlement. According to LPS, at the end of August there were about 1.87 million loans seriously delinquent and another 2.15 million loans in the foreclosure process. This is only down slightly from a year ago when 4.4 million loans were seriously delinquent or in-foreclosure. Once the settlement is reached, the pace of foreclosures will pick up sharply.

As more foreclosures come to the market at discounted prices, there will be greater downward pressure on all housing values… translated: PRICES Will Fall further!

What Do Experts Believe the Impact Will Be?

Here are the pricing projections by several major entities:

▪ Zillow believes we will not see a bottom in prices until the first quarter of 2012.

▪ Standard & Poors thinks prices will drop 5% in the next few months.

▪ JP Morgan Chase believes prices will depreciate 6 to 7% over the next six months.

▪ Barclays says prices will fall 7% by the end of the first quarter of 2012.

▪ Fannie Mae has published a recent report indicating that it will take the market another 5 years to rebound. “We are five years through a 10-year adjustment process,” said Fannie Mae chief economist Doug Duncan

Bottom Line

Waiting for the spring selling season to put your house on the market may not make sense this year. The increase in demand may be overshadowed by an increased supply of distressed properties. Most agree this increase in inventory will far outweigh buyer demand. In situations where supply is greater than demand, prices decrease.

You may pay a hefty price for the convenience of not having your property on the market right now.

May the market be with you.

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.

Should I wait? (for the Buyer)

If you’re a regular reader, you have heard (read) my opinion that we are unlikely to see a substantial recovery in the housing market prior to 2020. Seems lately that more and more “experts” are agreeing with this time line. Even so, people are still making decisions everyday to buy or sell their homes.

What seems most important is that buyers and sellers make those decisions wisely. Doing so requires a deeper understanding of the factors that most buyers and sellers should be considering as they struggle with their respective decisions.

Last time I focused on the Seller’s Decision Making Process. This column focuses on the Buyer’s Decision Process and primarily on the decision for first-time buyers (those not now owning a home). My last column addressed the Buy Decision for Current Homeowners.

FACT:  For most markets, prices continue to fall and are likely to continue falling for the next several years.

Reasons to Buy:

1. Children/Family Needs: You desire a good place to raise your children and provide them with a good education. Related to this is the basic need for safety. It is increasingly difficult to find affordable rentals in the areas with the best schools and neighborhoods.
2. Control: Control over your environment… What colors you paint your walls… Having pets… etc…
3. Home Affordability vs. Rents: With declining prices and historically low interest rates, home affordability has been increasing substantially. At the same time with so many potential home buyers being removed from the buying market due to credit and employment issues, rents are on the rise and are expected to continue to rise until the market gets better. We have returned to the era where for the same amenities, it is cheaper to buy than to rent.
4. Historic Low Interest Rates: One day you’ll be telling folks “Yea, I remember when interest rates were 4% and lower…” These rates have been around for long enough that we’ve grown accustomed to them… But we all know that this is a temporary situation… While no one knows when this is going to happen, rates will go back up and with them the associated monthly payments for the same home, a 1% rise in interest rates over today’s rates is equivalent to a 20% increase in a home’s selling price (if you are financing 95% of the home’s price).
5. Interest Tax Deduction: The interest tax deduction provides even more costs reduction in the real cost to purchase a home over renting. Despite all the political discussion about tax reform…  the possibility of this deduction going away is highly remote.

Reasons to Stay Put:

1. You’re unsure that you will remain in the area for at least five to seven years. With declining prices over the course of the next several years followed by several years of minimal appreciation you would likely have negative equity at the time of sale. Get out your spreadsheet and see if the benefits gained will outweigh your likely equity position. Note: I am developing a spreadsheet that helps prospective buyers do just that. When complete, I’ll publish a link that gives you access to the tool.
2. Your job security is uncertain. If your company or business is in distress, it’s probably better to stay where you are until you are in a more secure situation.
3. You don’t have good credit or a decent down payment. Do you have a job and income you can document? Lenders have become much more careful about whom they’re giving their money to. Work on rebuilding your credit now. It’s possible it can be repaired much more quickly than you think.

May the market be with you.

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.

Should I wait? (for the Seller)

If you’re a regular reader, you have heard (read) my opinion that we are unlikely to see a substantial recovery in the housing market prior to 2020. Seems lately that more and more “experts” are agreeing with this time line. Even so, people are still making decisions everyday to buy or sell their homes.

What seems most important is that buyers and sellers make those decisions wisely. Doing so requires a deeper understanding of the factors that most buyers and sellers should be considering as they struggle with their respective decisions.

Even though it’s definitely a Buyers’ Market, the first group that I focus on is that of the Seller.

FACT:  Now is NOT a Great time to sell… Even so, it could be the Best time to Sell!

Reasons to Sell:

1. Safety: Do you fear for your safety? If you don’t feel safe in your own home all other reasons to stay or go are pretty heavily diminished.
2. Job Change/Relocation: Job transfers or losses are often driving concerns for homeowners to sell. Do you really want to maintain this home from a distance? Are you considering renting the home… are you up to the task and risks of being a landlord? Has a job loss or change made the option of continuing in this current home unrealistic?
3. Market Values have dropped significantly: If values in your home’s market area have dropped or are dropping significantly (especially compared to surrounding areas), selling now may be your best option to preserve what remains of your equity or to stop future losses.
4. You have equity in your home and are moving to a place where homes are cheaper. In your new market, your money will go a lot further. Count your blessings!
5. You have outgrown your existing home and expansion doesn’t make economic sense. Don’t put more money into a home than you will be able to recoup unless your plan is to remain for several more years. If you are looking to upsize… you’re probably better off moving up now while mortgage rates are at historic lows and there are plenty of bargains on the market that will met your needs and desires.
6. You’ve found the right house in the right area for you. The schools are great. You love the area and know it would be hard to find another house like the one you have your eye on. In a better market, you would most likely have much more competition for that home. Understand that even in this market the most desirable properties can still experience multiple offers and bidding wars… but much less frequently than in times past.

Reasons to Stay Put:

1. You’ve lived in your house less than five years. Chances are you haven’t had enough time to accumulate equity in your home. Indeed, you may have negative equity.
2. Your job security is uncertain. If your company or business is in distress, it’s probably better to stay where you are until you are in a more secure situation. Conversely, it might be a time to consider downsizing as a way to cut future expenses. But be aware of the potential for negative equity if you have been in your current home less than five years.
3. You don’t have good credit or a decent down payment. Do you have a job and income you can document? Lenders have become much more careful about whom they’re giving their money to. Selling when you have credit problems could lock you out of a purchase of another home, even if your purpose is to decrease expenses.
4. You don’t have a driving reason/motivation to sell. If there is no driving need or motivation for selling (see reason to sell above).  

Next time we’ll take a look at the decision process for Buyers.

May the market be with you.

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.

It’s a Changed World…

One of the things I most enjoy about my profession is the opportunity to talk with a wide variety of people about their dreams, troubles/concerns and aspirations. It not only gives me an opportunity to serve and help my neighbors but also the opportunity to learn about what’s going on in the world and where things might well be headed.

While everyone’s story is different, patterns of changed attitudes and expectations emerge that are very revealing about the future direction of many things. Take for example the term “Bigger and Better!” The mantra of the masses but a decade ago has clearly been rejected for “smaller, faster, cheaper, better.” This is a movement of light years at warp speed!

While many are holding their breath waiting for a return to the “era of excess” or even to something that feels normal, the truth is the world has changed! It may not be the change we wanted… but pining for what was is not a useful survival technique. In this faster world, it is in your best interests to accept the fact that the world has changed, understand the change and learn how to survive if not prosper in that changed world.

So how has the world changed and how should you respond?

First, I suggest you began listening very carefully for the number of times you hear the following words: Smaller, Simpler, Simplify, Sustainable, Downsize… These words describe the direction and the tone of the changed world! The day of the McMansion has passed… If you own one, now is the time to act because the market for it is clearly shrinking. If you can sell and breakeven let alone salvage some of your equity you are among the lucky!

Holding out for the return of the market will prove to be a big mistake.

So where is the market headed? The under 35 market (the Millennials) is clearly trending away from large suburban homes toward more urban and modest homes… and the upper age limit for this trend is clearly moving up! As a matter of fact an increasing number of Baby Boomers are trending in the same direction!

Secondly, understand that today’s interest rates are an anomaly! If you are intending to stay put in your larger home as your final home, content with the rising cost to maintain and operate that home… by all means make sure that your home is either paid for or in a permanent mortgage arrangement at these record low interest rates. By all means exit an ARM (Adjustable Rate Mortgage), as quickly as you can.

Finally, don’t procrastinate… That’s one thing that hasn’t changed!

May the market be with you.