This Month in Real Estate
August 2010

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Market Update

Housing activity continues to remain above year-ago levels despite some setbacks resulting from the now-expired tax credit. Improved stability in home prices with similar levels of distressed properties seen last year offers a hopeful sign the market is holding its ground. However, the economy still has a considerable way to go to achieve its full recovery. 

Consumers are saving more and being picky about how they spend their money. While a higher savings rate means less spending in the near term, this is a positive sign that households are taking control of their finances to build some cushion that can be used to pay down debt and/or support future spending.

Existing home sales marked the twelfth consecutive month of year-over-year increase in June. On a monthly basis, sales activity eased 5.1% from May. The moderation in home sales reflects “understandable swings as buyers responded to the tax credits,” according to Lawrence Yun, NAR chief economist. He anticipates such impact to show up in the next two months.

June’s median home price increased for the fourth consecutive month. Distressed homes, accounting for 32% of sales last month, continued holding home prices at highly affordable levels for the time being. While distressed sales hovered around the same level as a year ago, the gain in home prices is pointing to a sustained stability in the making.

Interest Rates

Mortgage rates set a new record low in July as consumer confidence softened and unemployment remained elevated. This presents a great opportunity for buyers and investors. Coupled with lowered home prices and a robust rental market, investors are finding their way to cash-flow opportunities. As recovery gains deeper roots, rates will need to rise to keep inflation in check. 

Rates as of August 6.

This Month's Video

Topics For Home Owners, Buyers & Sellers

Consumers Beware: New Credit Card Tricks

On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, marking a turning point for American consumers and ending the days of unfair rate hikes and hidden fees. While the new law offers significant safeguards, consumers still need to be vigilant against new practices designed to outflank the new rules.

Stay as informed as possible, read your statement , report any irregularities immediately, and watch for these tricks.

• Shortened Billing Cycle: The CARD Act requires companies to allow a window of at least 21 days from when a statement is mailed and when payment is due. Cardholders are reporting being shortchanged on billing cycle time and then being assessed late-payment fees.
  Advice: Watch out for shortened payment dates.

• Sunday Due Dates: The CARD Act stipulates if a creditor does not receive or accept payments on weekends or holidays, then the date is extended and late-payment fees shouldn’t be triggered. However, some banks say they’re open for business even when there’s no mail delivery.
  Advice: Don’t assume you are safe.

• Low-Limit Cards: The CARD Act says a card’s total annual fees can’t exceed 25% of a borrower’s credit line. However, some issuers may be evading the fee restrictions by charging an up-front processing fee that doesn’t fall under the 25% cap.
  Advice: Watch out for processing and other fees.

• False Inactive Fees: Issuers will no longer be able to charge inactivity fees or extra charges for people who don’t spend a certain amount each year, effective August 22. However, some issuers are charging an annual fee that’s waived if cardholders reach a certain spending threshold.
  Advice: Watch out for conditional annual fees.

• Rebate Offers: Some credit cards offer refunds on finance charges when customers pay on time. However, rebate offers aren’t governed by the CARD Act, and such offers can be revoked suddenly and for any reason, leaving cardholders stuck with higher charges.
  Advice: Rebates may translate to real savings in finance charges.

Source: The Wall Street Journal

Contact me,

your local real estate expert,

for information about what's going on in our area. 

Newsletter Contents

1. Market Update

2. Interest Rates

2. Video

3. Topics for Owners, Buyers & Sellers

Brought to you by KW Research. For additional graphs and details, please see the This Month in Real Estate PowerPoint Report. 

The opinions expressed in This Month in Real Estate are intended to supplement opinions on real estate expressed by local and national media, local real estate agents and other expert sources.  You should not treat any opinion expressed on This Month in Real Estate as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion.  Keller Williams Realty, Inc., does not guarantee and is not responsible for the accuracy or completeness of information, and provides said information without warranties of any kind.  All information presented herein is intended and should be used for educational purposes only.  Nothing herein should be construed as investment advice.  You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.  All investments involve some degree of risk.  Keller Williams Realty, Inc., will not be liable for any loss or damage caused by your reliance on information contained in This Month in Real Estate.

This Month in Real Estate
July 2010

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Commentary

The U.S. housing market continues to benefit from the tax credit: home prices and sales remain above year-ago levels. As the summer progresses, however, the positive impact of government stimulus will wind down. Experts point to improved stability as a sign the market can likely hold its ground without further support from the government. However, economists indicate that the key for the housing market through the end of 2010 will be job growth and a manageable level of distressed properties.

The economy continues its journey to recovery with two steps forward and one step back, but the ground lost during the recession was great and the progress so far should be celebrated. The road to this particular recovery has been expected to be more prolonged than many previous recovery periods. Consumer confidence lowered from its high in May primarily due to a disappointing employment report, while the swelling federal deficit has also raised concern. Unmanageable debt levels have lead some European countries into their current situation, and Americans do not want to follow suit.

A job bill that would have further extended unemployment benefits has not gotten off the ground due to concerns over the deficit. Sited as a top priority for the government, a financial overhaul bill continues to proceed though Congress. The bill’s goal is to protect the financial system and the average consumer from unnecessary risk and unsound lending practices in an effort to build a stronger system for the long-term stability of the U.S. economy.

The Housing Market

Existing Home Sales

Existing home sales slowed slightly in May to 5.66 million, down 2.2% from April but up 19.2% from last May. This is the eleventh consecutive month of year-over-year increase. Lawrence Yun, NAR chief economist, attributes this to the “ongoing effects of the home buyer tax credit,” and he anticipates the same next month. In May, 46% of sales were from first-time buyers, down slightly from the previous month’s 49% but still considered high.

Median Home Price

The median price for an existing home was $179,600 in May, up 2.8% from a year ago and 4.2% from April. Distressed homes, accounting for 31% of last month’s sales, continued skewing prices downward slightly as they are usually discounted from comparable homes. Overall, prices this past year continued to show increased stability over the previous year. Vicki Cox Golder, president of NAR states, “With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus.”

Inventory

Total housing inventory declined slightly to 4.89 million in May, representing between eight and eight-and-a-half month supply of sales (if homes continue to sell at the current pace consistently and no new ones come on the market). There are about the same number of homes for sale as last year, with 1% more currently available. Although there continues to be a nice selection of available homes for buyers, the 3.4% fewer number from last month helps to further stabilize prices.

Mortgage Rates

Mortgage rates fell to a new record low in June amid a drop in consumer confidence concerning the recovery. The tone of the Federal Reserve’s latest meeting was notably tempered on the outlook for recovery, indicating that the economy is stronger than last year but there is still much ground to cover. Interest rates significantly below 5% may pique the interest of more investors.

Affordability

Affordability remains advantageous, supported by the lowest mortgage rates in decades as well as lowered home prices. The home price-to-income ratio continues to remain well below the historical average of 25%, but stabilized home prices are drawing affordability back up toward more normal levels. The ratio now stands at 15.4%.

Sources: National Association of Realtors, Freddie Mac

Government Action

Tax Credit’s Closing Deadline Extended

Home buyers who signed a contract before the end of April will now have three additional months to close and still be eligible for the homebuyer tax credit. A bill to extend the deadline to September 30 obtained congressional approval on June 30, the evening it was set to expire.

Many of these buyers are purchasing short sales which have notably slower contract-to-close time frames. A KW Research study found short sales often take twice as long to close as typical home sales.

While this does not extend the credit to any additional buyers, it is great news for those 180,000 who have not yet closed on their home sale through no fault of their own.

Source: WSJ.com

Topics For Buyers & Sellers

Real Estate Investing

The increased affordability and low interest rates may have some thinking about purchasing real estate investment properties. Here are a few key points on investing from The Millionaire Real Estate Investor:

• Criteria: Criteria are the standards that define what kind of property you are looking for. These are the things that you list when you are hunting for the next opportunity to invest in: Is it a single family or multi-family opportunity? What features or amenities does it have? What is the location? These are aspects of the property that can’t be negotiated.

• Terms: This is how you turn your opportunity into a good deal. Once the property meets your criteria, terms are the negotiable aspects of your investment, such as the offer price, the down payment, interest rates, occupancy date, and closing costs. Terms are where a great deal can be created from even the most modest criteria. They mean understanding the financial basics of a transaction, knowing which elements are flexible, being systematic about getting all you can from every deal, and also, for some, knowing when to walk away.
  

There are some great terms right now with record-low interest rates and discounted distressed properties. Keep in mind that the lending for investment properties has additional requirements – like cash reserves and total property limits. Talk to a professional for more information.

• Network: the people who help you find, complete, and support your real estate investments.

Contact me,

your local real estate expert,

for information about what's going on in our area. 

Don't forget to check out this month's video:

Newsletter Contents

1. Commentary

2. The Housing Market

3. Government Action

4. Topics for Buyers
    and Sellers

Brought to you by KW Research. For additional graphs, please see the This Month in Real Estate PowerPoint Report. 
In an effort to reduce the impact on the environment, This Month in Real Estate Report is available in email newsletter format. 
Please consider the environment before printing.

This Month in Real Estate
June 2010

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Commentary

The housing sector continues to show signs of recovery. Together the tax credit (which expired at the end of April), the more upbeat consumer confidence, and favorable market conditions all contributed to bolstering April’s sales activity - with existing home sales increasing for the second straight month.

The return of buyer confidence with much of the home price correction believed to be over, encouraging economic developments and historically low mortgage rates, will provide the stepping stone for further market stabilization.

Meanwhile, stagnant job growth and elevated levels of foreclosure continue to be cause for concern. The government is now taking proactive steps to restructure the mortgage industry with risk-management measures seen by experts as a “huge cut in red tape” that would ultimately benefit consumers.

The Housing Market

Existing Home Sales

Existing home sales strengthened in April to 5.77 million, up 8.7% from March and 22.8%from last April. This is the tenth consecutive month of year-over-year increases.

According to Lawrence Yun, NAR chief economist, although part of the uptick was expected from the tax credit, there’s also been a return of buyer confidence, for those who remained on the sideline last year. The return of confidence is a result of stabilized prices, an improved economy, and continued advantageous interest rates.

In March, 49% of sales were from first-time buyers.

Median Home Price

The median price for an existing home was $173,100 in April, up 2.1% from a year ago and 4% from March. Distressed homes, accounting for a third of last month’s sales, continued skewing prices downward slightly as they typically are discounted 15% compared to typical home sales. Overall, prices this past year showed increased stability over the previous year.

Inventory

Total housing inventory rose slightly to 4.04 million in March, representing slightly less than an eight-and-a-half month supply of sales (if homes continue to sell at the current pace consistently and no new homes come on the market). Compared to the previous year, there are now 3% more homes on the market. Although this is the first rise in twenty consecutive months of decline when compared to the previous year, NAR’s chief economist believes this increase can be attributed to the summer selling season and that home prices are back on track.

Mortgage Rates

Mortgage rates dipped back below 5% this month due largely in part to the European debt crisis. As confidence in the value of the Euro eroded, more investors chose the U.S. dollar instead. With more demand for dollars, the cost of debt (interest rate) dropped. This event has also shown the global recovery is not free-and-clear of roadblocks to complete recovery. However, experts still anticipate rates will increase to between 6% and 6.5% by the end of the year. As the recovery gains increasing traction, the Federal Reserve will need to increase rates to prevent inflation.

Affordability

Affordability remains advantageous, supported by some of the lowest mortgage rates in decades as well as less expensive home prices. The home price-to-income ratio continues to remain well below the historical average of 25%. The ratio now stands at 14.9%.

Sources: National Association of Realtors, Freddie Mac

Government Action

FHA Turns to Lenders to Monitor Brokers

As the Federal Housing Administration (FHA), the government agency that insures home loans, saw its market share rise to about one-third of the mortgage market last year, up from 2% in 2006, the number of brokers seeking to arrange FHA-backed loans has mushroomed to 9,043 at the end of 2009 from 5,759 just two years earlier.

The agency, finding itself inadequately equipped to monitor its brokers, is shifting the responsibility to its lenders.

The FHA expects the new policies to result in better risk management, and the cut in red tape should produce better rates for consumers.

As of May 20, the FHA no longer certifies mortgage brokers or tracks the performance of brokers’ loans. Instead, lenders are now required to sponsor brokers and assume responsibility for loans they originate, including losses from fraud or mistakes in underwriting. In addition to revamping broker insight, the agency also beefed up oversight of its lenders by increasing net-worth requirements to $1 million from $250,000. The change is in effect for one year for existing lenders.

Source: WSJ.com

Topics For Buyers & Sellers

Myths about Distressed Properties – Debunked!

Distressed properties – foreclosures and short sales alike – represent potentially great value for prospective buyers. However, common misconceptions about the time and money investment involved with buying such properties may keep many from inquiring further into this market. KW Research survey findings, taken from more than 2,500 KW associate respondents who have worked with distressed properties, can help steer clear of concerns as you make your way to homeownership.

Contact me,

your local real estate expert,

for information about what's going on in our area. 

Don't forget to check out this month's video:

Newsletter Contents

1. Commentary

2. The Housing Market

3. Government Action

4. Topics for Buyers
    and Sellers

Brought to you by KW Research. For additional graphs, please see the This Month in Real Estate PowerPoint Report. 
In an effort to reduce the impact on the environment, This Month in Real Estate Report is available in email newsletter format. 
Please consider the environment before printing.

This Month in Real Estate
April 2010

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Commentary

The economic recovery continues to slowly but steadily deepen its roots. Consumer sentiment ticked up in March and it appears businesses are feeling more positive as well. According to a CEO Economic Outlook Survey, America’s top CEOs are expecting an increase in sales, along with increased or stabilized capital spending and employment.

Over the past several months, the hot topic of health care reform took much of Congress’s attention. Now, with the bill passed into law, the government is turning its attention to other matters to help bolster the economy including the job bill and financial reform.

High unemployment and elevated levels of foreclosures and distressed homeowners continue to be two of the biggest factors in preventing a robust recovery. The government’s attentive attitude toward these obstacles is seen as a positive sign by industry and economic experts.

The Housing Market

Existing Home Sales

Existing home sales softened in February. According to Lawrence Yun, NAR chief economist, the widespread winter storms during the month may have masked underlying demand as “buyers couldn’t get out to look at homes in some areas and that should negatively impact near-term contract activity.” February sales of 5.02 million remained 7 percent above the 4.69 million-units last year.

Median Home Price

The median price for an existing home was $165,100 in February, a 1.8 percent drop from February 2009. Distressed homes, which accounted for 35 percent of sales last month, continued to skew prices downward as they typically were discounted in comparison with non-distressed homes.

Inventory

Total housing inventory rose 9.5 percent to 3.59 million, representing an 8.6-month supply at the current sales pace. Compared to the previous year, there were 5.5 percent fewer homes on the market.

Mortgage Rates

Mortgage rates dipped to 4.99 percent in February from 5.03 percent in January. During the first week of April, rates crossed the 5 percent threshold but still remained near historically low levels. While the full effect of the Federal Reserve mortgage-backed securities purchase program’s expiration at the end of March is yet to be seen, the Fed echoed its accommodating policy to support the economy.

Affordability

Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, and the first-time home buyer tax credit. The home price-to-income ratio continues to remain well below the historical average of 25 percent. The ratio now stands at 14.2 percent.

Sources: National Association of Realtors, Freddie Mac

Government Action

Mortgage Relief for Unemployed

Attempting to overhaul its foreclosure prevention program, the Obama administration took noteworthy steps to help the unemployed stay current on their mortgage through tough times.

While the trouble in the housing market stemmed originally started with loose lending practices, high unemployment and underwater homeowners are now the major factors contributing to foreclosure.

The program will now:

• Require lenders to “slash” payments for the unemployed for 3-6 months. In some cases, payments could be deferred entirely.
• Cut payments to at least 31 percent of previous income, about the same amount that unemployment insurance pays.
• Become effective over the next 6 months.
• Not require new taxpayer funds. The program has only used a
  small portion of its $75 billion allocation.

Source: The Washington Post

Helping Underwater Homeowners

Underwater borrowers are one of the major driving forces behind foreclosure. It’s estimated that one in four homeowners owes more than their home is worth. Economists categorize these borrowers as “high risk” because they can’t sell or refinance.

The government is taking the following steps to address underwater borrowers:

1. Principal Reduction. Lenders will be asked to reduce the principal loan balance if it is 15 percent or greater than what the home is worth. This will only be available to borrowers who are current on their mortgage payments and they will need to stay current to “earn” the full reduction over three years.
2. FHA Refinancing. The Federal Housing Administration (FHA) offers refinancing alternatives for borrowers who are underwater and offering incentives for lenders who reduce the principal on primary mortgages by at least 10 percent.
3. Second Mortgages. The government will double the incentive amount paid to lenders who help modify second mortgages. Half of all troubled homeowners have second mortgages, which have been an obstacle in providing modifications.
4. Short Sales. Incentives to lenders who help troubled borrowers that don’t qualify for the program, most commonly a short sale, have been increased.

Source: The Washington Post

Topics For Buyers & Sellers

Energy Efficient Tax Tips

Three Things You Need to Know About Home Improvements to Help Slash Energy Bills and 2010 Taxes

1. Simple qualifying improvements include increasing insulation or insulating items such as door and windows, roofing, skylights, etc. These qualify for a 30 percent credit on the cost of the item, not installation, up to a maximum credit cap of $1,500.
2. Certain big-ticket items have no maximum credit cap. The credit is still 30 percent of the cost of the item. These items include furnace, air conditioning, tankless water heater, heat pump, geothermal system, solar or wind installation.
3. It’s a tax credit, not a deduction. That means it reduces the actual taxes you owe, not your taxable income. Use IRS Form 5695, and hang onto receipts and product labels.

Don’t forget to check your state and local area for additional incentives.

For more info on the federal tax credit, check out: EnergyStar.gov and NAHB.org/efficiencytaxcredit.

Contact me,

your local real estate expert,

for information about what's going on in our area.

Newsletter Contents

1. Commentary

2. The Housing Market

3. Government Action

4. Topics for Buyers
and Sellers

For a more detailed report with additional graphs and government action, please see the This Month in Real Estate PowerPoint Report.

In an effort to reduce the impact on the environment, This Month in Real Estate PowerPoint Report is now also available in email newsletter format. Please consider the environment before printing.