Buyers looking to optimize the 2009 and 2010 tax credit are rapidly running out of time, but is the tax incentive a real reason to buy? What I am finding is buyers are still buying for the same reasons they always have. To enhance their quality of life. If you are a buyer who is thinking of buying now, lets brainstorm some of the benefits of home ownership for your family that aren't necessarily financial.
1. Home ownership gives you roots, family traditions, and a long term tie to a community. Think about your kids going to the same school for a period of years, growing up with friends who quite possibly will be life long, and celebrating family holidays in the same home, year after year after year. Rental memories are nice, but generally the are only leased memories....
2. Landscaping and snow shoveling can be fun. Child hood memories and adult good times are enhanced with the little things. How nice is it to plant a tree or bush in your backyard and watch them blossom in the spring, and go to sleep in the winter. As silly as it sounds, some of my favorite memories were made shoveling the family driveway and suddenly finding myself in the thick of a full on snowball fight. Rental apartments don't usually have driveways to shovel.
3. Sense of responsibility is taught to our kids through home ownership. Kids who watch their parents tighten a leaky pipe, caulk a bath tub, paint a fence, or call a repairman to fix a faulty furnance learn about taking care of things, and also "murphy's law". Dealing with the challenges of home ownership teaches our family the old addage that "stuff happens". How we deal with stuff happening is a good lesson for adult hood.
4. Who wants to smell what the neighbors are cooking? Rental living exposes us to the smells, sights and noises of our neighbors, and not always in a good way. Home ownership gives you freedom and privacy. The freedom to blast your music when you want, and the privacy to live your life with out worrying about what the neighbors will hear, smell or see.
5. Who wants to keep moving? Lets face it, nobobdy likes to pack up the wagon and move often. Being a renter puts you at the mercy of a Landlord and his lease, you never know when the year to not renew is upon you. Home ownership gives you the peace of mind to know that your family can stay where its roots are, for as long as you choose to.
The tax credit is a nice present for buying today, but owning your home is a gift you and your family will enjoy on a daily basis for as long as you desire.
Sure homeownership is challenging at times, but the lifelong benefits you gain are alot more valueable than an $8,000 tax credit.
Visit us at http://coldwellbankerleader.com , or Call us at 773-465-4200 to start enjoying the American dream of home ownership today.
We look forward to making that dream a reality at Coldwell Banker Leader Realty.
Wednesday, March 3, 2010
Monday, November 10, 2008
Short Sales and foreclosures, can't deny it, they are here
In the past, I have been very leary of short sales and foreclosure listings that are for sale in the multiple listing service that I use in my day to day business. Unfortunately for our economy, and unfortunately for the banks and investors that provided financing for so many properties that are now for sale, it is a fact that many of these properties that I believed would never make it to a closing table, are now showing up as closed sales.
In the areas of Skokie, West Rogers Park, Lincolnwood, Evanston, and Edgewater, I am noticing that almost 1 out of every 3 properties that has gotten to the Pending, or attorney approval/Inspection stage of a sale have the terms short sale or bank owned somewhere in the remarks.
I am also noticing that many of these properties that close are closing at 50%-60% of the amount owed on a mortgage from the previous homeowner. Wondering where the 700 Billion dollars in the bailout is going? Spend a few minutes with me searching the MLS statistics, and you will feel real queezy about the way things are going.
What does that say to buyers who are looking to buy property right now? It says opportunity is knocking. You know the old saying, buy when there is blood in the streets, and sell when the trumpets are sounding. If you can buy now, buy now!!!!
You can easily search foreclosure and short sale property that is listed in the MLS at http://coldwellbankerleader.com , this is a free search.
If you want to be steered in the right direction of how to buy a foreclosure or short sale property, call me at 312-513-4490 or email me back at earl.ruthman@coldwellbanker.com
In the areas of Skokie, West Rogers Park, Lincolnwood, Evanston, and Edgewater, I am noticing that almost 1 out of every 3 properties that has gotten to the Pending, or attorney approval/Inspection stage of a sale have the terms short sale or bank owned somewhere in the remarks.
I am also noticing that many of these properties that close are closing at 50%-60% of the amount owed on a mortgage from the previous homeowner. Wondering where the 700 Billion dollars in the bailout is going? Spend a few minutes with me searching the MLS statistics, and you will feel real queezy about the way things are going.
What does that say to buyers who are looking to buy property right now? It says opportunity is knocking. You know the old saying, buy when there is blood in the streets, and sell when the trumpets are sounding. If you can buy now, buy now!!!!
You can easily search foreclosure and short sale property that is listed in the MLS at http://coldwellbankerleader.com , this is a free search.
If you want to be steered in the right direction of how to buy a foreclosure or short sale property, call me at 312-513-4490 or email me back at earl.ruthman@coldwellbanker.com
Tuesday, September 9, 2008
Fannie Mae and Freddie Mac Takeover, what does it mean?
So on Friday it was leaked that the government is taking over Freddie Mac and Fannie Mae. On Sunday it was official. Freddie Mac and Fannie Mae have now been taken over by the federal government. But what does it mean for the real estate market, mortgage interest rates, and the US economy.
First let's look at what it means for mortgage rates. I would expect that the government takeover will result in lower mortgage rates, possibly a full point lower. Why? Basically the Fed has been struggling to lower mortgage rates for the last year in an attempt to assist the troubled real estate market. The Fed has lowered prime rates several times in an attempt to pull down mortgage interest rates. In spite of this over the last 8 months mortgage interest rates have mostly risen. Now with full control of Freddie Mac and Fannie Mae (which provides insurance for most mortgages in the US) they will have much more control over the mortgage market and mortgage rates. As long as their objective stays the same, we can expect lower rates.
What does the takeover say about the current situation in the real estate market? This should have been obvious from all the events that preceded this but the takeover shows that the real estate market is in serious trouble. The federal government doesn't just take over large companies on a whim, especially an administration with a Republican president that believes strongly in free markets. This is not simply a government takeover. This is the largest takeover in US history. Basically the takeover happened because it was believed if nothing was done we were headed for economic catastrophe.
How is this going to effect the real estate market? Although the takeover is a bad sign about our current situation it should have a positive effect on the real estate markets moving forward. First lowering mortgage interest rates should be quite a boon for the real estate market. Lowering rates lowers the effective cost of a house. And historically lowering rates has a positive effect on real estate values.
Additionally, if the Fed is smart they will reduce some of the mortgage restrictions Freddie Mac and Fannie Mae have created in the last year. While I would not like to see the mortgage market return to the free-wheeling lending of a few years ago, some of the current rules are bizarrely restrictive. The lending environment typically works like a pendulum moving from one extreme to another. Currently lending restrictions are not just stricter than what we saw during the real estate boom a few years ago but they are more restrictive than anything we have seen in the last 15 - 20 years. Hopefully a federally controlled Fannie Mae and Freddie Mac can help return us to normal as far as lending restrictions.
Lastly the government takeover could put taxpayers in the lurch for billions in loan losses. In the short term the government is going to have to infuse money into Freddie Mac and Fannie Mae. They have been losing money for quite some time and that is not going to change overnight. The government will have to around 20 to 30 billion into Fannie Mae and Freddie Mac to get them back to financial solvency.
Does this mean the federal government is insane? It depends on how you look at the issue. While taking over Fannie Mae and Freddie Mac will be very costly for the government and taxpayers, allowing them to fail could have led the US economy into a depression. In a depression those that keep their jobs have to make up for all the lost tax revenues for the large number of people that lose their jobs. So taxpayers could have been in a lurch if the Feds had decided to stay on the sidelines. So in summary the federal government found itself in a tight spot and decided to bet that they can fix the real estate market. We will find out if they were correct over the next several months.
First let's look at what it means for mortgage rates. I would expect that the government takeover will result in lower mortgage rates, possibly a full point lower. Why? Basically the Fed has been struggling to lower mortgage rates for the last year in an attempt to assist the troubled real estate market. The Fed has lowered prime rates several times in an attempt to pull down mortgage interest rates. In spite of this over the last 8 months mortgage interest rates have mostly risen. Now with full control of Freddie Mac and Fannie Mae (which provides insurance for most mortgages in the US) they will have much more control over the mortgage market and mortgage rates. As long as their objective stays the same, we can expect lower rates.
What does the takeover say about the current situation in the real estate market? This should have been obvious from all the events that preceded this but the takeover shows that the real estate market is in serious trouble. The federal government doesn't just take over large companies on a whim, especially an administration with a Republican president that believes strongly in free markets. This is not simply a government takeover. This is the largest takeover in US history. Basically the takeover happened because it was believed if nothing was done we were headed for economic catastrophe.
How is this going to effect the real estate market? Although the takeover is a bad sign about our current situation it should have a positive effect on the real estate markets moving forward. First lowering mortgage interest rates should be quite a boon for the real estate market. Lowering rates lowers the effective cost of a house. And historically lowering rates has a positive effect on real estate values.
Additionally, if the Fed is smart they will reduce some of the mortgage restrictions Freddie Mac and Fannie Mae have created in the last year. While I would not like to see the mortgage market return to the free-wheeling lending of a few years ago, some of the current rules are bizarrely restrictive. The lending environment typically works like a pendulum moving from one extreme to another. Currently lending restrictions are not just stricter than what we saw during the real estate boom a few years ago but they are more restrictive than anything we have seen in the last 15 - 20 years. Hopefully a federally controlled Fannie Mae and Freddie Mac can help return us to normal as far as lending restrictions.
Lastly the government takeover could put taxpayers in the lurch for billions in loan losses. In the short term the government is going to have to infuse money into Freddie Mac and Fannie Mae. They have been losing money for quite some time and that is not going to change overnight. The government will have to around 20 to 30 billion into Fannie Mae and Freddie Mac to get them back to financial solvency.
Does this mean the federal government is insane? It depends on how you look at the issue. While taking over Fannie Mae and Freddie Mac will be very costly for the government and taxpayers, allowing them to fail could have led the US economy into a depression. In a depression those that keep their jobs have to make up for all the lost tax revenues for the large number of people that lose their jobs. So taxpayers could have been in a lurch if the Feds had decided to stay on the sidelines. So in summary the federal government found itself in a tight spot and decided to bet that they can fix the real estate market. We will find out if they were correct over the next several months.
Thursday, July 10, 2008
Ben Stein says "Now Buy Real Estate"!
Posted on Thursday, July 3, 2008, 12:00AM
Now for some reassuring words. Of all of the columnists writing in this space, I suspect I am the oldest. This means I have seen the most economic fluctuations. This also means I am less terrified about them than younger heads.
Let me put this differently. I read recently in The Wall Street Journal that the stock market was at the time of that writing almost in " Bear Market Territory," which is to say, down roughly 20% or more from its high. This, said the author of the piece, shows that we are about to have very bad economic times. The author helpfully noted that the market has been down into "Bear Market Territory " some nine times since the mid-1960's. Without doubt, this author was trying to do his best, and to serve his readers.
But here's a relevant addendum: yes, the market may have fallen 20% or more nine times since then. But there have only been five recessions since then.
That is to say, the stock market predicts 10 out of five recessions. Not such a great record.
The truth is that while the economy is clearly slowing down we are not yet in a recession. There has so far not even been one quarter of negative economic growth, nor even a break-even quarter. We may well have one soon, but two in a row are required for the classic definition of a recession. And as I keep saying, if anyone can call anything a recession, the whole subject loses all intellectual or factual meaning. This too could happen-a real recession-but it has not happened yet.
There are still reasons for hope. Exports are phenomenally strong. Minerals and agriculture are strong. Medical is strong. The government sector is large and robust. Sadly, military must remain strong indefinitely.
The government is running an immense deficit, and this is stimulative. True, finance is in tatters, as is transportation, refining, and home building. These are large sectors. They may fall so much that they bring the economy into recession.
But think about this: somewhere out in the big wide world, there is voracious demand for minerals and commodities. That (along with speculation) explains their major price increases. It would be extremely rare for there to be a spectacular worldwide demand for commodities along with a serious fall in demand for other factors in an economy. That is, it would be rare for demand to be both rising and falling at the same time. It could happen, but it would be rare.
However, let's assume we do have a recession. I hope we don't, but we might. What do we do about it? What can we do about it? Just keep plugging along. Just keep buying broad indexes. Just keep a good chunk of liquid assets. None of us can control the economy. Thus, we just have to keep swimming in the roiled waters.
As we cling to our life jackets, please remember this: no recession lasts forever. I can well recall so many times in the past when every single headline in The Wall Street Journal was about some record growth of sales or profits. Then time passes and every single headline is about horrible news. Then time passes and there is mixed news, and then it's all good news again.
Economies go through cycles. But the long-term trend is up, and people who buy broad indexes when the news is bad, if they live long enough, live to be happy about it.
Besides, what alternative do you have? If you have money to invest, yes, keep some in cash. But cash loses its value in inflationary times. In fact, holding cash over long periods - beyond what you need for peace of mind - is a su refire way to make yourself unhappy. You will lose money on it over long periods as inflation nibbles at it.
The best bet usually is what has gone down the most, and that, for now, is real estate. I got a letter from a thoughtful reader saying he was going to wait until real estate had reached its all time low before he bought. But how will he know? And how rarely does he find a home he truly loves? Even when homebuyers buy at the top of the cycle, if they love their homes, and if they can hold on, they always end up delighted.
Yes, there will be news saying housing will not recover THIS TIME. But in fact, except in really depressed areas, housing recovers EVERY TIME and goes on to pass its prior record. The real story of real estate, as my brilliant money manager friend, Phil DeMuth, says, is of failing to buy, not of staying away successfully.
The plain fact is that you don't know when real estate will be at bottom until it's too late. If you see a home you love, buy it now if you plan to be in it a long time. And know that the headline writers want to whip you up and make you crazy about the economy. They sell fear. Stay calm and stay well to do.
Now for some reassuring words. Of all of the columnists writing in this space, I suspect I am the oldest. This means I have seen the most economic fluctuations. This also means I am less terrified about them than younger heads.
Let me put this differently. I read recently in The Wall Street Journal that the stock market was at the time of that writing almost in " Bear Market Territory," which is to say, down roughly 20% or more from its high. This, said the author of the piece, shows that we are about to have very bad economic times. The author helpfully noted that the market has been down into "Bear Market Territory " some nine times since the mid-1960's. Without doubt, this author was trying to do his best, and to serve his readers.
But here's a relevant addendum: yes, the market may have fallen 20% or more nine times since then. But there have only been five recessions since then.
That is to say, the stock market predicts 10 out of five recessions. Not such a great record.
The truth is that while the economy is clearly slowing down we are not yet in a recession. There has so far not even been one quarter of negative economic growth, nor even a break-even quarter. We may well have one soon, but two in a row are required for the classic definition of a recession. And as I keep saying, if anyone can call anything a recession, the whole subject loses all intellectual or factual meaning. This too could happen-a real recession-but it has not happened yet.
There are still reasons for hope. Exports are phenomenally strong. Minerals and agriculture are strong. Medical is strong. The government sector is large and robust. Sadly, military must remain strong indefinitely.
The government is running an immense deficit, and this is stimulative. True, finance is in tatters, as is transportation, refining, and home building. These are large sectors. They may fall so much that they bring the economy into recession.
But think about this: somewhere out in the big wide world, there is voracious demand for minerals and commodities. That (along with speculation) explains their major price increases. It would be extremely rare for there to be a spectacular worldwide demand for commodities along with a serious fall in demand for other factors in an economy. That is, it would be rare for demand to be both rising and falling at the same time. It could happen, but it would be rare.
However, let's assume we do have a recession. I hope we don't, but we might. What do we do about it? What can we do about it? Just keep plugging along. Just keep buying broad indexes. Just keep a good chunk of liquid assets. None of us can control the economy. Thus, we just have to keep swimming in the roiled waters.
As we cling to our life jackets, please remember this: no recession lasts forever. I can well recall so many times in the past when every single headline in The Wall Street Journal was about some record growth of sales or profits. Then time passes and every single headline is about horrible news. Then time passes and there is mixed news, and then it's all good news again.
Economies go through cycles. But the long-term trend is up, and people who buy broad indexes when the news is bad, if they live long enough, live to be happy about it.
Besides, what alternative do you have? If you have money to invest, yes, keep some in cash. But cash loses its value in inflationary times. In fact, holding cash over long periods - beyond what you need for peace of mind - is a su refire way to make yourself unhappy. You will lose money on it over long periods as inflation nibbles at it.
The best bet usually is what has gone down the most, and that, for now, is real estate. I got a letter from a thoughtful reader saying he was going to wait until real estate had reached its all time low before he bought. But how will he know? And how rarely does he find a home he truly loves? Even when homebuyers buy at the top of the cycle, if they love their homes, and if they can hold on, they always end up delighted.
Yes, there will be news saying housing will not recover THIS TIME. But in fact, except in really depressed areas, housing recovers EVERY TIME and goes on to pass its prior record. The real story of real estate, as my brilliant money manager friend, Phil DeMuth, says, is of failing to buy, not of staying away successfully.
The plain fact is that you don't know when real estate will be at bottom until it's too late. If you see a home you love, buy it now if you plan to be in it a long time. And know that the headline writers want to whip you up and make you crazy about the economy. They sell fear. Stay calm and stay well to do.
Monday, June 30, 2008
are we on the road to real estate recovery?
On the path to a housing rebound
The pain that homeowners and homebuilders are feeling now is a sign that things are going to get better.
By Shawn Tully, editor at large
Last Updated: June 25, 2008: 9:08 AM EDT
Realty reality check
More VideosMore from Fortune
McCain and Obama's green dream
Solar power's cold reality
Ford: Waiting for the next shoe to drop
FORTUNE 500
Current Issue
Subscribe to Fortune
NEW YORK (Fortune) -- The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it's an almost certain sign that the path to a housing recovery is finally in sight.
If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That's the only way to tame the glut of "For Sale" signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida.
Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households.
As a result, the market is now swamped with one million new and existing homes for sale that aren't occupied, and hence need to sell quickly. That's a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.
"For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes," says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S.
The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly.
Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.
The return of the first-time buyer
The key player in any recovery scenario is the first time buyer. The housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses.
But when the first-timers are absent, the entire buying chain gets frozen.
Today, newbies are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they're building tends to be far smaller than the McMansions of the boom, selling for far lower prices. KB Home's average selling price dropped to $248,0000 in its February quarter, versus $267,000 a year earlier. In 2006, KB's basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size.
So the first time in a decade renters can carry the mortgage payments and taxes on a new house for what they're paying a landlord. Call it the New Affordability.
Here's how the numbers play out: Single-family housing starts are now running at fewer than 500,000 a year. The normal demand for housing, based on immigration and household formation, is around one million units.
We won't get back to that figure for a while because so many people rushed to buy homes during the boom.
But with first timers returning, sales should rise to almost 700,000 units by the end of next year, according to Bernard Markstein, senior economist for the National Association of Home Builders. That means sales will soon exceed new production by as much as 250,000 units a year.
That margin forms the foundation of the housing revival that comes in four steps.
Step 1: First, the return of first-time buyers will shrink the overhang of new houses for sale.
Step 2: Second, because so few new homes are being built, first-timers will start buying existing homes from owners who want to move up but have been trapped by the dearth of buyers. Their improved fortunes, though, come with a big caveat: The prices of new homes are now lower than comparably-sized existing homes. It's as if used cars are selling for more than new ones. That can't last. So move-up buyers are going to have to accept less than they had hoped to get for their current homes.
They'll get a big break as they trade up, however. Unless they bought at the height of the boom, they'll still sell at a profit. They can then use that equity to buy bigger homes at bargain prices. During the bubble, homebuilders started pushing up home sizes to 3,500 square feet or more. It's those behemoths that are selling for the steepest discounts today.
Step 3: Next, housing starts should start rising, probably next year. The increase, however, will be slow and gradual. For the next two years at least, homebuilders will compete ferociously with existing home sellers for customers.
Step 4: Eventually, the glut of existing homes will disappear as well. The excess of new-home buyers over new homes being built makes that inevitable. But the oversupply is so enormous that the healing process could take as much as three more years. Only then will prices in former bubble markets start rising again.
What could go wrong?
One event has the potential to slow or even derail the recovery: A sharp rise in interest rates. Right now, the first-timers are gorging on 6% loans guaranteed by the FHA. But rates may not stay there.
If they rise to 8% or higher because inflation rebounds, it would take a far bigger drop in prices to make new and existing homes affordable.
The New Affordability is now in place. But if rates rise, we'll have to establish a New New Affordability - at even lower prices.
First Published: June 24, 2008: 10:44 AM EDT
The pain that homeowners and homebuilders are feeling now is a sign that things are going to get better.
By Shawn Tully, editor at large
Last Updated: June 25, 2008: 9:08 AM EDT
Realty reality check
More VideosMore from Fortune
McCain and Obama's green dream
Solar power's cold reality
Ford: Waiting for the next shoe to drop
FORTUNE 500
Current Issue
Subscribe to Fortune
NEW YORK (Fortune) -- The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it's an almost certain sign that the path to a housing recovery is finally in sight.
If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That's the only way to tame the glut of "For Sale" signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida.
Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households.
As a result, the market is now swamped with one million new and existing homes for sale that aren't occupied, and hence need to sell quickly. That's a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.
"For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes," says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S.
The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly.
Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.
The return of the first-time buyer
The key player in any recovery scenario is the first time buyer. The housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses.
But when the first-timers are absent, the entire buying chain gets frozen.
Today, newbies are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they're building tends to be far smaller than the McMansions of the boom, selling for far lower prices. KB Home's average selling price dropped to $248,0000 in its February quarter, versus $267,000 a year earlier. In 2006, KB's basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size.
So the first time in a decade renters can carry the mortgage payments and taxes on a new house for what they're paying a landlord. Call it the New Affordability.
Here's how the numbers play out: Single-family housing starts are now running at fewer than 500,000 a year. The normal demand for housing, based on immigration and household formation, is around one million units.
We won't get back to that figure for a while because so many people rushed to buy homes during the boom.
But with first timers returning, sales should rise to almost 700,000 units by the end of next year, according to Bernard Markstein, senior economist for the National Association of Home Builders. That means sales will soon exceed new production by as much as 250,000 units a year.
That margin forms the foundation of the housing revival that comes in four steps.
Step 1: First, the return of first-time buyers will shrink the overhang of new houses for sale.
Step 2: Second, because so few new homes are being built, first-timers will start buying existing homes from owners who want to move up but have been trapped by the dearth of buyers. Their improved fortunes, though, come with a big caveat: The prices of new homes are now lower than comparably-sized existing homes. It's as if used cars are selling for more than new ones. That can't last. So move-up buyers are going to have to accept less than they had hoped to get for their current homes.
They'll get a big break as they trade up, however. Unless they bought at the height of the boom, they'll still sell at a profit. They can then use that equity to buy bigger homes at bargain prices. During the bubble, homebuilders started pushing up home sizes to 3,500 square feet or more. It's those behemoths that are selling for the steepest discounts today.
Step 3: Next, housing starts should start rising, probably next year. The increase, however, will be slow and gradual. For the next two years at least, homebuilders will compete ferociously with existing home sellers for customers.
Step 4: Eventually, the glut of existing homes will disappear as well. The excess of new-home buyers over new homes being built makes that inevitable. But the oversupply is so enormous that the healing process could take as much as three more years. Only then will prices in former bubble markets start rising again.
What could go wrong?
One event has the potential to slow or even derail the recovery: A sharp rise in interest rates. Right now, the first-timers are gorging on 6% loans guaranteed by the FHA. But rates may not stay there.
If they rise to 8% or higher because inflation rebounds, it would take a far bigger drop in prices to make new and existing homes affordable.
The New Affordability is now in place. But if rates rise, we'll have to establish a New New Affordability - at even lower prices.
First Published: June 24, 2008: 10:44 AM EDT
Tuesday, June 3, 2008
Home purchase's can fall apart at the last second, you need a realtor who is on their toes to see that everything comes to a finish.
Most buyers and sellers feel relieved when the negotiations are done and the purchase agreement has been signed by all parties. It's a milestone. But, you might want to hold off celebrating until the transaction closes.
Current market conditions have complicated the home sale industry. Lender requirements for mortgage qualification and the types of home loans available are changing daily. Before getting into contract to buy a home, make sure you double check with your lender or mortgage broker to confirm that the loan you were qualified for several weeks ago is still available.
For example, a week before closing, buyers who were purchasing their first home -- and who had been assured that their financing was in order -- were informed that their lender was no longer providing the type of loan they needed to complete the transaction.
These were well-qualified buyers who had enough cash for a 10 percent down payment and closing costs. They needed to borrow a first mortgage for 80 percent of the purchase price and a second mortgage for the remaining 10 percent. The lender who was providing the 10 percent second mortgage decided they would no longer provide 10 percent second loans to first-time buyers.
In a similar situation, buyers who had been approved for 80-10-10 financing were told by their lender at the last minute that their underwriting guidelines had changed. The lender would no longer provide a second mortgage for 10 percent of the purchase unless they were also providing the first mortgage.
A year ago, financing was readily available to just about anyone who wanted to buy a house. And, most of what sold appraised for the purchase price. It was rare to see a listing back on the market because the buyer couldn't get financing. If a deal fell apart, the most likely culprit was an irreconcilable difference over an inspection issue.
HOUSE HUNTING TIP: Due to the change in the credit markets, buyers are wise to include financing and appraisal contingencies in the purchase contract in addition to an inspection contingency. A contingency should give the buyers a period of time to satisfy the condition in question. If they act in good faith and attempt to satisfy the condition, but are unable to, they may have the right to withdraw from the contract without penalty, depending on how the contact is written.
When buyers find themselves in competition, it's tempting to waive contingencies. A year ago, many buyers felt comfortable waiving contingencies for financing and property appraisal. There was a loan product for everyone and appraisals weren't an issue.
This is no longer the case. Most lenders have stopped doing easy-qualifier, no-cash loans and pay-option mortgages, to name a few. Lenders have also tightened up on appraisals, credit score and verifiable income requirements.
Buyer's remorse is a more serious issue in a slow market where home prices are soft than it is in a market where prices are escalating. Sellers can help prevent buyer's remorse from sinking a deal by properly preparing their homes for sale. This includes pricing accurately for the current market so that the buyers don't feel they overpaid when they see the inspection reports.
Obtaining pre-sale home inspections will also help keep buyers from having second thoughts. The more buyers know about the condition of the property before they make an offer, the less chance they will back out due to inspections.
THE CLOSING: A soft market makes an offer that is made contingent on selling another property more risky. Even if your buyer has lined up a buyer for his house, if that deal falls apart so does yours.
Our agents at Coldwell Banker Leader Realty have the experience, know how, and support behind them to propel your transaction to a finish. Call us at 773-465-4200 or visit us on the internet at http://coldwellbankerleader.com to put our 30 plus years of experience in your corner.
Current market conditions have complicated the home sale industry. Lender requirements for mortgage qualification and the types of home loans available are changing daily. Before getting into contract to buy a home, make sure you double check with your lender or mortgage broker to confirm that the loan you were qualified for several weeks ago is still available.
For example, a week before closing, buyers who were purchasing their first home -- and who had been assured that their financing was in order -- were informed that their lender was no longer providing the type of loan they needed to complete the transaction.
These were well-qualified buyers who had enough cash for a 10 percent down payment and closing costs. They needed to borrow a first mortgage for 80 percent of the purchase price and a second mortgage for the remaining 10 percent. The lender who was providing the 10 percent second mortgage decided they would no longer provide 10 percent second loans to first-time buyers.
In a similar situation, buyers who had been approved for 80-10-10 financing were told by their lender at the last minute that their underwriting guidelines had changed. The lender would no longer provide a second mortgage for 10 percent of the purchase unless they were also providing the first mortgage.
A year ago, financing was readily available to just about anyone who wanted to buy a house. And, most of what sold appraised for the purchase price. It was rare to see a listing back on the market because the buyer couldn't get financing. If a deal fell apart, the most likely culprit was an irreconcilable difference over an inspection issue.
HOUSE HUNTING TIP: Due to the change in the credit markets, buyers are wise to include financing and appraisal contingencies in the purchase contract in addition to an inspection contingency. A contingency should give the buyers a period of time to satisfy the condition in question. If they act in good faith and attempt to satisfy the condition, but are unable to, they may have the right to withdraw from the contract without penalty, depending on how the contact is written.
When buyers find themselves in competition, it's tempting to waive contingencies. A year ago, many buyers felt comfortable waiving contingencies for financing and property appraisal. There was a loan product for everyone and appraisals weren't an issue.
This is no longer the case. Most lenders have stopped doing easy-qualifier, no-cash loans and pay-option mortgages, to name a few. Lenders have also tightened up on appraisals, credit score and verifiable income requirements.
Buyer's remorse is a more serious issue in a slow market where home prices are soft than it is in a market where prices are escalating. Sellers can help prevent buyer's remorse from sinking a deal by properly preparing their homes for sale. This includes pricing accurately for the current market so that the buyers don't feel they overpaid when they see the inspection reports.
Obtaining pre-sale home inspections will also help keep buyers from having second thoughts. The more buyers know about the condition of the property before they make an offer, the less chance they will back out due to inspections.
THE CLOSING: A soft market makes an offer that is made contingent on selling another property more risky. Even if your buyer has lined up a buyer for his house, if that deal falls apart so does yours.
Our agents at Coldwell Banker Leader Realty have the experience, know how, and support behind them to propel your transaction to a finish. Call us at 773-465-4200 or visit us on the internet at http://coldwellbankerleader.com to put our 30 plus years of experience in your corner.
Monday, May 12, 2008
Skokie, a first time buyer's dream
College Grads and First Time Home Buyers: Skokie Homes are For You!
Did you just Graduate? Or are you maybe a young, first time home buyer?
Well if you are, it’s not that difficult to find a good place to call home and still be frugal in the village of Skokie.
Many times when you’re looking for a new home, it’s hard to
1). Find a good location
2). Get a good price, and…
3). Locate a home you actually want to purchase!
Buying a new home can be very difficult, but only if you make it too hard on yourself. Condos are a great option for new home buyers and those who’ve recently entered the workforce, like College graduates. If you are looking for a serene location, that offers great schools, entertainment and easy access to Chicago’s nightlife, then Skokie, Illinois is a perfect place to call home.
When shopping for homes Skokie has been truly overlooked, as it has many options from condos to multiple family homes. The village has been a hotbed of new construcion as of late. If it is a condominium you are looking for, the village of Skokie is fertile ground for frugal home buyers. Buy now and you will buy in to an assett that only increases in value over time.
Skokie currently has more than 185 listings for condominiums with prices ranging from $150,000 to $300,000. Typical condominiums don’t always offer spacious interiors and suburban upscale living, especially not in a community like Skokie, but with the new conversion condos and new construction condominium offerings, the units are a steal.
For instance, a new construction building located right on Skokie Boulevard is listed at $297,000 with a candid view of the Skokie forest perserves wooded area, features an in-unit washer and dryer, all new appliances, and some high-end amenities that you have to see to believe. If you were to look for a luxury home in Chicago, with a spectacular view and like amenities you’d pay well over $400k.
These kinds of homes are perfect for small families, entreprenuers, and new home buyers looking for affordable housing.
To easily search buying opportunities in skokie, call us at 773-465-4200 or visit us at http://coldwellbankerleader.com
Did you just Graduate? Or are you maybe a young, first time home buyer?
Well if you are, it’s not that difficult to find a good place to call home and still be frugal in the village of Skokie.
Many times when you’re looking for a new home, it’s hard to
1). Find a good location
2). Get a good price, and…
3). Locate a home you actually want to purchase!
Buying a new home can be very difficult, but only if you make it too hard on yourself. Condos are a great option for new home buyers and those who’ve recently entered the workforce, like College graduates. If you are looking for a serene location, that offers great schools, entertainment and easy access to Chicago’s nightlife, then Skokie, Illinois is a perfect place to call home.
When shopping for homes Skokie has been truly overlooked, as it has many options from condos to multiple family homes. The village has been a hotbed of new construcion as of late. If it is a condominium you are looking for, the village of Skokie is fertile ground for frugal home buyers. Buy now and you will buy in to an assett that only increases in value over time.
Skokie currently has more than 185 listings for condominiums with prices ranging from $150,000 to $300,000. Typical condominiums don’t always offer spacious interiors and suburban upscale living, especially not in a community like Skokie, but with the new conversion condos and new construction condominium offerings, the units are a steal.
For instance, a new construction building located right on Skokie Boulevard is listed at $297,000 with a candid view of the Skokie forest perserves wooded area, features an in-unit washer and dryer, all new appliances, and some high-end amenities that you have to see to believe. If you were to look for a luxury home in Chicago, with a spectacular view and like amenities you’d pay well over $400k.
These kinds of homes are perfect for small families, entreprenuers, and new home buyers looking for affordable housing.
To easily search buying opportunities in skokie, call us at 773-465-4200 or visit us at http://coldwellbankerleader.com
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