Real Estate Blog

The housing market is looking healthier. Here are more than 7 reasons why now is the time to jump into the market.

1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)

2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.

3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.

4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.

5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.

6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.

Additional Reasons to Buy:

Home Builders See Hope for Improving Market
Home builders are beginning to be cautiously optimistic that the worst may finally be over.

Orders for new KB Homes increased 26 percent in the first quarter, the company reported. It was the firm’s first year-over-year increase in more than three years.

First-time home buyers purchased 70 percent of the homes. They represent ''the most attractive segment of the market as they do not have to sell a home before purchasing,'' says CEO Jeffrey T. Mezger.

Banks Move Back Into Jumbo Lending
Major banks are spotting opportunities and getting back into the business of making jumbo loans.

Bank of America, the country’s largest mortgage lender since it acquired Countrywide, has renamed its lending arm Banking of America Home Loans and is rolling out a program to finance loans between $730,000 and $1.5 million.

“There’s a real need for loans of this size," says Barbara Desire, who heads consumer real estate operations.

Other lenders moving into this space include ING Group, Amsterdam-based banking and insurance conglomerate, which will offer jumbos as large as $2 million through ING Direct.

Fed Plans Spark Drop in 30-Year Rates
The average interest on a 30-year mortgage fell to a 38-year low of 4.85 percent during the week ending March 27 from 4.98 percent the prior week, Freddie Mac reported.

The decrease came on the heels of the Federal Reserve's announcement that it plans to purchase another $750 billion in mortgage-backed securities and up to $300 million in Treasuries. President Obama says refinancing is now possible for 40 percent of mortgages and encourages home owners to reap the benefits of the record-low rates.

NAR: Outlook Favorable for Second-Home Market
Despite weakening second home purchases in 2008, the long-term demand looks favorable for the second-home market because there are large numbers of people in the prime years for buying a second home.

Currently, 39.2 million people in the United States are ages 50 to 59—a group that dominated sales in the first part of this decade. An additional 44.8 million people are between 40 and 49, and another 40.7 million are 30 to 39.

“While economic factors can affect sales from one year to the next, the fundamental demand from these large population groups will remain,” says Lawrence Yun, NAR chief economist. “Given that most people become interested in buying a second home in their 40s, the bulge of population approaching middle age should drive the second-home market over the next decade.”

The median price of a vacation home was $150,000 in 2008, down 23.1 percent from $195,000 in 2007. The typical investment property cost $108,000 last year, which is 28 percent below the 2007 median of $150,000.

“As in the market for primary residences, it appears that many sales of deeply discounted distressed homes are pulling down the median price in the second-home market as well,” Yun says.

Yun says lifestyle considerations are the single most important factor in the vacation home market.

“People are buying weekend homes or recreational property to use themselves or for a family retreat—investment considerations are secondary for most vacation-home buyers with relatively modest interest in renting,” he says.

2008 Second-Home Market Declines

The combination of vacation- and investment-home sales slipped to 30 percent of all existing- and new-home transactions in 2008, according to the NATIONAL ASSOCIATION OF REALTORS ^®' latest report.

However, more than four out of 10 investment buyers and more than three in 10 vacation-home buyers paid cash for their properties, with large percentages indicating that portfolio diversification was a factor in their purchase decision.

The market share of homes purchased for investment was 21 percent last year, unchanged from 2007, while another 9 percent were vacation homes, compared with a 12 percent market share in 2007. The total share of second homes declined from 33 percent of all transactions in 2007. In 2005, the peak year for home speculation, 40 percent of sales were second homes.

NAR’s 2008 Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.8 percent to 512,000 last year from 740,000 in 2007. Meanwhile, investment-home sales fell 17.2 percent to 1.12 million in 2008 from 1.35 million in 2007. Primary residence sales declined 13.2 percent to 3.77 million in 2008 from 4.34 million in 2007.

Yun says the findings are understandable given the economic backdrop.

“We expected vacation-home sales to fall given the impact of a declining economy on discretionary purchases,” he says. “A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas, with a smaller portion of new homes in the sales mix.”

Vacation Home Market Snapshot

The typical vacation-home buyer in 2008 was 46 years old, had a median household income of $97,200, and purchased a property that was a median of 316 miles from their primary residence; 35 percent were within 100 miles and 36 percent were 500 miles or more.

When asked about their reasons for purchasing a vacation home, 89 percent of buyers wanted to use the home for vacation or as a family retreat; 27 percent to diversify investments; 27 percent to rent to others; 26 percent to use as a primary residence in the future; and 17 percent for use by a family member, friend or relative.

Some other findings on this market:

• In terms of location, 26 percent of vacation homes were purchased in small towns, 23 percent in a rural area, 23 percent in resorts, 20 percent in a suburb, and 8 percent in an urban area or central city.
• Seventy percent of vacation homes purchased in 2008 were detached single-family homes, 18 percent condos, 5 percent townhouses or rowhouses, and 7 percent other.
• Sixty-nine percent of vacation home buyers and 84 percent of investment home buyers purchased existing homes; the rest purchased new homes.
• Investment-home buyers in 2008 had a median age of 47, earned $85,000, and bought a home that was fairly close to their primary residence – a median distance of 19 miles.
• When asked about the most important reasons for purchasing an investment home, 58 percent said to provide rental income; 38 percent to diversify investments; 19 percent for use by a family member, friend or relative; and 15 percent to use for vacations or as a family retreat.
• Twenty-eight percent of investment homes were purchased in a suburb and another 20 percent in an urban or central city area, 23 percent in a rural area, 22 percent in a small town, and 6 percent in a resort area.
• Sixty-four percent of investment homes purchased in 2008 were detached single-family homes, 22 percent condos, 8 percent townhouses or rowhouses, and 6 percent other.
• Vacation-home buyers plan to keep their property for a median of 12 years; 58 percent plan to keep their vacation home for 11 years or more. Investment buyers plan to hold their property for a median of five years.
• Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 71 percent of primary residence buyers.

The size of the second-home market is significant. NAR’s analysis of U.S. Census Bureau data shows there are 8.1 million vacation homes and 40.5 million investment units in the United States, compared with 75.5 million owner-occupied homes.

NAR’s 2008 Investment and Vacation Home Buyers Survey, conducted in March 2009, is based on 1,924 responses. The survey controlled for age and income, based on information from the larger 2008 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.

The 2008 Investment and Vacation Home Buyers Survey can be ordered online at www.realtor.org/newresearch. The report is free for NAR members, but the cost is $125 for non-members.

Source: NAR

Florida’s existing home sales rose in February, making it the sixth consecutive month that sales activity showed increases in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors® (FAR). February’s statewide sales also increased over January’s figures in both the existing home and existing condo markets.

Existing home sales rose 20 percent last month with a total of 9,858 homes sold statewide compared to 8,181 homes sold in February 2008, according to FAR. February’s statewide existing home sales were 16.7 percent higher than January’s statewide sales.

Florida Realtors also reported a 15 percent gain in statewide sales of existing condominiums in February, continuing a trend in recent months for higher statewide sales of both the existing home and existing condo markets compared to year-ago levels. Statewide existing condo sales last month increased 25.1 percent over the total units sold in January.

Thirteen of Florida’s metropolitan statistical areas (MSAs) reported increased existing-home sales in February while 11 MSAs also showed gains in condo sales. It marks the eighth month in a row that a number of markets have reported increased sales.

Florida’s median sales price for existing homes last month was $141,900; a year ago, it was $199,300 for a 29 percent decrease. Industry analysts with the National Association of Realtors® (NAR) report a significant downward distortion in the current median price due to many discounted sales, including a large number of foreclosures. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in January 2009 was $169,900, down 13.8 percent from a year earlier, according to NAR. In California, the statewide median resales price was $254,350 in January; in Massachusetts, it was $321,000; in Maryland, it was $244,820; and in New York, it was $205,000.

Significant variations in local markets continue, according to NAR’s latest housing outlook, which also notes that it will take time for the impact of the economic stimulus to show in housing data. “Some markets appear to have reached the tipping point of accelerating home buying,” said NAR Chief Economist Lawrence Yun. “Improvement from the economic stimulus isn’t likely to show as closed home sales before summer, although we may see an earlier lift from lower mortgage interest rates.”

NAR analysts estimate the impact of the federal economic stimulus package and lower interest rates on the housing market to be about 900,000 additional home sales in 2009 compared to conditions before the stimulus package. By the end of the year, NAR expects inventory to fall below an eight-month supply, which would be consistent with home price stabilization.

In Florida’s year-to-year comparison for condos, 3,198 units sold statewide compared to 2,785 sold in February 2008 for a 15 percent increase. The statewide existing condo median sales price last month was $109,300; in February 2008 it was $173,900 for a 37 percent decrease. In the latest data available at press time, NAR reported the national median existing condo price was $174,400 in January 2009.

Interest rates for a 30-year fixed-rate mortgage averaged 5.13 percent last month, down significantly from the average rate of 5.92 percent in February 2008, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s medium-size markets, the Fort Pierce-Port St. Lucie MSA reported a total of 372 homes sold in February compared to 263 homes a year ago for a 41 percent increase. The existing home median sales price was $122,100; a year ago, it was $172,900 for a 29 percent decrease. In the year-to-year comparison for the existing condo market, a total of 71 units sold in the MSA last month, up 22 percent compared to 58 condos sold the previous February. The market’s existing condo median price was $116,700; a year ago, it was $126,700 for an 8 percent decrease.

The new home sales numbers were beter than the street estimates and may signal a bottom in the housing market.

© 2009 FLORIDA ASSOCIATION OF REALTORS®

Survey: Americans Still Eager to Buy
Nearly 25 percent of adults say they plan to purchase a home in the next five years and half of those (53.5 percent) will be first-time home buyers, according to a survey commissioned by Move Inc., operator of Realtor.com.

More than 18 percent cite the $8,000 tax credit as a motivating factor. Potential home buyers with higher incomes are more interested in the tax credit than those in lower income brackets, with 43.4 percent of potential first-time buyers who earn $50,000 or more saying they plan to use the tax credit.

According to the survey, half of all Americans (49.6 percent) are paying more attention to home values today than they were a year ago, especially those ages 25 to 34 (61.9 percent). The median age of first-time home buyers is 30 years old.

The Move survey uncovered changing attitudes toward owning a home. About two-thirds (62.5 percent) now consider their home primarily a place to live as opposed to an investment. Adults earning up to $20,000 and between $30,000 and $39,900 annually are significantly more likely to feel most strongly that a home is more of a place to live than an investment as compared to those earning $50,000 or more.

When presented with a list of amenities, home owners wanted it all–with more space leading the list (about 10 percent chose that option). Other amenities that were high on many shoppers’ lists included energy saving features (6.8 percent), bigger or nicer yard (6.1 percent), a better location (4.2 percent), or updated amenities (3.4 percent).

The Move survey also found that 18 percent plan to take advantage of the Obama administrations program to prevent foreclosures.

Below are the numbers from NAR.

Existing-home sales increased in February, reversing losses in January, according to the latest report by the NATIONAL ASSOCIATION OF REALTORS®. However, sales activity remains relatively soft, reflecting additional layoffs and buyers waiting for housing provisions in the economic stimulus package to take effect, according to NAR.

Existing-home sales— including single-family, townhomes, condominiums and co-ops—rose 5.1 percent to a seasonally adjusted annual rate of 4.72 million units in February from a pace of 4.49 million units in January. Existing-home sales are 4.6 percent below the 4.95 million-unit level in February 2008. Seasonal adjustment factors are more volatile in winter months, but sales rates over the past few months show dampened sales activity, according to NAR.

Lawrence Yun, NAR chief economist, says first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges.

“Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” he says. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.”

Home Buyer Tax Credit Increases Activity

NAR President Charles McMillan says home shopping activity has picked up with housing affordability at a record high.

“The number of buyers looking for homes rose 5 percent in February, and also was 5 percent above a year ago,” he says. “It appears most of the increase in buyer traffic occurred in the latter part of the month after the $8,000 first-time buyer tax credit was put in place. At the same time, mortgage purchase applications have risen, so we expect to see sales picking up around late spring.”

McMillan notes that more potential buyers are learning about the tax credit, just as the traditional spring home-buying season begins.

Existing-Home Sales Rise in February

The national median existing-home price for all housing types was $165,400 in February, down 15.5 percent from a year ago when the median was $195,800 and conditions were close to normal. The median is where half of the homes sold for more and half sold for less.

“Given the downward distortion in price comparisons due to distressed sales, it’s important for owners to keep in mind that this doesn’t equate to a similar loss of value for traditional homes in good condition,” Yun says.

Housing inventory: Total housing inventory at the end of February rose 5.2 percent to 3.80 million existing homes available for sale, which represents a 9.7-month supply at the current sales pace, unchanged from January. In the six months prior to February, the total number of homes for sale had steadily declined from a record level last July.

Single-family home sales: rose 4.4 percent to a seasonally adjusted annual rate of 4.23 million in February from a level of 4.05 million in January, but are 3.6 percent below the 4.39 million-unit pace in February 2008. The median existing single-family home price was $164,600 in February, down 15 percent from a year ago.

Existing condominium and co-op sales: increased 11.4 percent to a seasonally adjusted annual rate of 490,000 units in February from 440,000 units in January, but are 13.1 percent lower than the 564,000-unit pace a year ago. The median existing condo price was $172,200 in February, which is 18.7 percent lower than February 2008.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage edged up to 5.13 percent in February from a record low 5.05 percent in January. The rate was 5.92 percent in February 2008. Last month’s average mortgage rate was the second lowest since data collection began in 1971. Last week the rate further declined to 4.98 percent.

Regional Breakdown

Yun says a recovery in the West is much stronger than expected. “Strong sales gains in the West are led by California, where the median listing price is beginning to rise for the first time in three years,” he says.

Here's how existing-home sales fared across the country:

• Northeast: jumped 15.6 percent to an annual pace of 740,000 in February, but 14.9 percent below February 2008. Median price: $251,200, down 4.8 percent from a year ago.
• Midwest: increased 1 percent in February to a pace of 1.04 million but 14 percent lower than a year ago. Median price: $131,000, which is 7.8 percent below February 2008.
• South: rose 6.1 percent to an annual pace of 1.74 million in February but 11.2 percent below February 2008. Median price: $146,700, down 10 percent from a year ago.
• West: increased 2.6 percent to an annual rate of 1.2 million in February and remain 30.4 percent higher than a year ago. Median price: $204,600, which is 30.3 percent below February 2008.

Source: NAR

Get ready for a Spring housing boom.

A combination of lower interest rates and government efforts to free up credit could result in a flood of homes being put up for sale in the coming weeks.

AP

"We're seeing a lot of activity with (sellers) starting to kick tires again," says Alan Rosenbaum, president of GuardHill Financial,  a mortgage advisory firm, in New York. "We try to show them the affordability factor. Rather than waiting for rock bottom, the intelligent ones are moving into the marketplace and seeing what's available."

While great for potential buyers, the added glut of housing could push prices even lower, further depressing the market. At the same time, it could actually jump-start housing by bringing more home-buyers into the market.

With stimulating the real estate market a principal goal of Washington policymakers, the temptation for buyers and sellers to jump into the market could be irresistible, especially if interest rates stay low.

"The first signs of life you see in home sales you're going to see met with a lot more inventory," says Michael Pento, chief economist with Delta Global Advisors. "The last thing you want to do as to add more inventory to an already-oversaturated market."

The past week indeed has shown some glimmers of hope for real estate.

Mortgage rates tumbled after the Federal Reserve on Wednesday announced plans to buy up mortgage debt in a move hoped to instill confidence that banks issuing home loans will have somewhere to sell them.

Earlier in the week, building permits and housing starts for February were far above analyst estimates, another sign that some confidence is returning to the housing markets even as home prices drop and sales continue to lag.

Pento, who says he has seen a spate of new "for sale" signs in his Monmouth County, N.J., neighborhood, thinks the combination of news has inspired some false hope that housing is ready for a quick turnaround.

"The real estate malaise that we're in is still going to last for quite some time," he says. "We have to hope for one thing, which is that the Hovnanians and the Lennars of the world have one thing inculcated into their brains: Don't overbuild."

Signs of Spring

Yet the anecdotal signs are increasing that some are pinning their hopes of an economic rebound on the various measures taken to help housing.

Mortgage refinancing applications have been on a fairly steady uptick, but now some of those are coming from folks who are also putting their homes on the block.Those types of clients, Rosenbaum says, feel they are in a win-win situation: Either they get someone to buy their home, or they negotiate a lower rate on their mortgage.

Rosenbaum says financing can be had, but there are more restrictions than in the past and buyers and refinancers need to explore as many options as possible when looking for money.

Should sellers and buyers match, the sellers believe this is an optimal time to trade up and get more value for their money at a time when housing prices are severely depressed.

"A lot of people would like to see what they can really get in today's market," Rosenbaum says. "If they can get a reasonable bid, they want to jump in the marketplace. They want to buy something they've been looking to buy for a couple of years."

The trend presents an interesting quandary: The glut of inventory will continue to depress prices for sellers, but also provide buyers with savings. Whether buyers can save more on their purchase than they lose on the sale will help determine if the trading-up trend can take root in the market.

"If you have a $500,000 home and you need to expand, you might take a 20 percent hit on the price. But if you're looking to buy an $800,000 home and you get a 20 percent reduction, you're ahead of the game," Rosenbaum says.

But Will Homes Sell?

Standing in the way of any hopes for housing is the ever-looming issue of whether banks will become any more willing to lend even in the face of federal guarantees and lower rates.

"When you start to see the excitement come back into the market, you're going to see the absorption rate really narrow and existing home sales pick up," Rosenbaum says. "But only if they can continue to get banks lending."

Banks are still faced with capital ratio problems and likely will continue to demand higher credit scores and substantial down payments, making it difficult for first-time buyers to get into the market.

That has some economists worried about whether it's reasonable to expect a change in housing.

"Until you can get the unemployment rate down and the economy back on its feet you're going to have no permanent healing in the residential real estate market," Pento says. "It's much too early to be talking about a substantial rise in the economy, because we're doing everything wrong."

In the meantime, those looking to sell their properties will have to be both bargain-hunter and bargain-provider, listing their homes at prices sensitive to their particular markets. Buyers, on the other hand, are facing a new reality of FICO credit scores of at least 620 as well as substantial skin in the game in the form of a 20 percent or so down payment.

"If I can come to market at the right price, that's really the most crucial element in the process," says Paul Purcell, of Charles Rutenberg Realty in New York. "You can advertise the heck out of something, but if you've mispriced for our market it doesn't matter what you're going to do. It's all about price right now for a buyer."

And convincing people to face the price realities of both the buy and sell sides of the equation is likely to be touchy.

"A lot of people are waiting for the right time to move up to a larger property but they don't want to sell their smaller house low. It's human nature to want that," says Diane Saatchi, senior vice president of The Corcoran Group.

"I don't think people have embraced the idea that they can get a better deal on the big property but they're going to have to take a hit on the smaller property. The market hasn't gotten there yet."

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