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
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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
Monday, June 30, 2008
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
Saturday, May 10, 2008
I wish I were a buyer in Skokie today.....
Buyer's, take note! 7649 N. Kostner, a brand new construction 4 bedroom up 3.5 bath home with stunning Chef's grade kitchen opening to great room with fireplace, huge living room and party sized dining room, master suite with spa quality bath and massive walk in closet, sharply finished basement with lots of living space, and large yard with deck and 2.5 car garage all situated across from beautiful park with kids playground and tennis court is now priced at $798,500. That is almost a 20% discount from the builders original asking price. See the home at http://7649kostner.com , or call us directly at 773-465-4200 for a private showing. While you are in the neighborhood, check out Skokie's festival of cultures on Saturday and Sunday May 17th and 18th and see why Skokie is one of the North Shores family friendly (and affordable) suburbs. There are so many exceptional values in Skokie, why not start your search at http://coldwellbankerleader right now!!!
Thursday, March 27, 2008
Evanston, huge new construction is 33% cheaper!
Coldwell Banker Leader Realty announces it will be offering the exciting new loft project with never before seen space options and pricing packages. "This project is priced at $200.00 per square foot, our competition is priced at $300.00 per square foot and up." "If you are a buyer who has been waiting for a price reason to buy, this is the reason" says Lonny Porter, Developer of the 2100 Greenwood lofts. We have priced this project at a place where buyers can be fearless in making a buying decision. We are 33% less expensive than other Evanston new construction projects. To see the floor plan, Please call Earl Ruthman, Broker, Coldwell Banker Leader Realty. The space, price and amenities will excite even the most weary of home seekers.
This summer and early Fall the 27 new lofts will be ready for delivery in Evanston. The development, 2100 Greenwood, is being constructed in what once was the Main Steel building, which dates back to the 1950s. The loft renovation process involved preserving much of the original building design and also incorporates a lot of green elements in that material was recycled and reused for construction. There is plenty of exposed brick and steel, giving the lofts a classic, traditional look while still showcasing plenty of luxury finishes.
The lofts at 2100 Greenwood will range in size from 980 to 2,700 square feet with prices starting at $335,000. The condos, depending on what floor they sit, either have private patios, Juliet balconies or recessed terraces. A few even have both terraces and patios. A portion of the condos have dramatic, 20 foot ceilings and are also handicap accessible for those with disabilities. All come with one indoor heated parking space for your automobile.
Other interior details include a top of the line stainless steel appliance package for the kitchen, granite counter tops, kitchen island, and hardwood flooring. Buyers get a choice of select cabinet finishes and colors, tile and flooring. The development features a beautifully landscaped courtyard with brick paths, lighting and a building lobby with secure entrance.
2100 Greenwood is sure to be a popular choice for buyers in the market for a home in the suburbs, and the units there are comparable to many of the luxury condominium projects in Evanston and the city of Chicago neighborhoods such as Lakeview and Lincoln Park. Just look, we have taken the fear out of your purchase.
This summer and early Fall the 27 new lofts will be ready for delivery in Evanston. The development, 2100 Greenwood, is being constructed in what once was the Main Steel building, which dates back to the 1950s. The loft renovation process involved preserving much of the original building design and also incorporates a lot of green elements in that material was recycled and reused for construction. There is plenty of exposed brick and steel, giving the lofts a classic, traditional look while still showcasing plenty of luxury finishes.
The lofts at 2100 Greenwood will range in size from 980 to 2,700 square feet with prices starting at $335,000. The condos, depending on what floor they sit, either have private patios, Juliet balconies or recessed terraces. A few even have both terraces and patios. A portion of the condos have dramatic, 20 foot ceilings and are also handicap accessible for those with disabilities. All come with one indoor heated parking space for your automobile.
Other interior details include a top of the line stainless steel appliance package for the kitchen, granite counter tops, kitchen island, and hardwood flooring. Buyers get a choice of select cabinet finishes and colors, tile and flooring. The development features a beautifully landscaped courtyard with brick paths, lighting and a building lobby with secure entrance.
2100 Greenwood is sure to be a popular choice for buyers in the market for a home in the suburbs, and the units there are comparable to many of the luxury condominium projects in Evanston and the city of Chicago neighborhoods such as Lakeview and Lincoln Park. Just look, we have taken the fear out of your purchase.
Wednesday, March 12, 2008
FHA loan limits increased! you can buy!
Great news for 1st time buyers, there are new increased loan limits for FHA purchases! You can buy a 2 or 3 flat building with minimal downpayment, you can buy with less than perfect credit, you can take advantage of the huge selection of available homes and very attractive financing packages that are available.
to look at the attractive selection of available area property go to http://coldwellbankerleader.com
to look at all the available financing packages, check out
http://www.yourillinoishome.com/financing/mortgageprograms.htm
to look at the attractive selection of available area property go to http://coldwellbankerleader.com
to look at all the available financing packages, check out
http://www.yourillinoishome.com/financing/mortgageprograms.htm
Sunday, March 2, 2008
Short Sale, Fact or fiction?
Everyone dreams about a bargain. In the real estate industry, handyman's specials, relocation sales, and yes, even foreclosure sales have been used as headlines by realtors to attract buyers in search of a property they can purchase at below market value. Nowadays, the new buzzword seems to be "short sale". I have been a real estate broker for 20 years now, and this term really has me shaking my head. My take on the process is something like this......
Realtor R approaches a seller who is having some financial challenges, and notes that the seller owes $400,000.00 on his mortgage. Realtor R feels that in today's market, the sellers home needs to be priced at $350,000 in order to be sellable in the current scheme of things. Realtor R advises the seller to list his property for $350,000, and Realtor R will negotiate with the mortgage holder (the bank) when a contract is written to accept less than is owed on the property so that the bank doesn't have to go through the process of foreclosing on the mortgage with the seller. Realtor R is negotiating a lower price for the buyer, he is letting the world know that the seller is having financial troubles, and he is asking the bank to take a loss on the mortgage that is owed, and at the same time asking the bank to also let him take his commission from the lowered procedes. Realtor R also says he is doing this to help save the sellers credit, even though the seller will have no equity from the closing. Sounds like a nice arrangement for Realtor R, and the purchaser, while the bank accepts a loss and allows for a commission, and the seller walks away from the closing with nothing.
I have been following listings that have been termed "short sales" in the multiple listing service of northern Illinois in Skokie, Lincolnwood, and West Rogers park for the past year, and what I have found is not surprising. There are currently 74 listings in these areas active in the multiple listing service with the term "short sale" in the remarks, and there have only been 3 properties that have actually closed. Not very good ratios of list to close.
What does this indicate you ask buyer's who are looking for a bargain? What this indicates to me is that if you see the term short sale in the remarks of a listing you are trying to purchase, the chances of you actually owning that property are somewhere between slim and none.
There are so many well priced properties on the market right now that can actually be bought. Why waste time and energy looking at the "short sale" pipe dream.
Go to http://coldwellbankerleader.com , and search our database of listings. Our sellers want their property sold!!!!
Realtor R approaches a seller who is having some financial challenges, and notes that the seller owes $400,000.00 on his mortgage. Realtor R feels that in today's market, the sellers home needs to be priced at $350,000 in order to be sellable in the current scheme of things. Realtor R advises the seller to list his property for $350,000, and Realtor R will negotiate with the mortgage holder (the bank) when a contract is written to accept less than is owed on the property so that the bank doesn't have to go through the process of foreclosing on the mortgage with the seller. Realtor R is negotiating a lower price for the buyer, he is letting the world know that the seller is having financial troubles, and he is asking the bank to take a loss on the mortgage that is owed, and at the same time asking the bank to also let him take his commission from the lowered procedes. Realtor R also says he is doing this to help save the sellers credit, even though the seller will have no equity from the closing. Sounds like a nice arrangement for Realtor R, and the purchaser, while the bank accepts a loss and allows for a commission, and the seller walks away from the closing with nothing.
I have been following listings that have been termed "short sales" in the multiple listing service of northern Illinois in Skokie, Lincolnwood, and West Rogers park for the past year, and what I have found is not surprising. There are currently 74 listings in these areas active in the multiple listing service with the term "short sale" in the remarks, and there have only been 3 properties that have actually closed. Not very good ratios of list to close.
What does this indicate you ask buyer's who are looking for a bargain? What this indicates to me is that if you see the term short sale in the remarks of a listing you are trying to purchase, the chances of you actually owning that property are somewhere between slim and none.
There are so many well priced properties on the market right now that can actually be bought. Why waste time and energy looking at the "short sale" pipe dream.
Go to http://coldwellbankerleader.com , and search our database of listings. Our sellers want their property sold!!!!
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