Don't let the idea of seasonality in the market hold you back.
Now is a GREAT time to sell!
In Chicago's Gold Coast the fourth quarter boasts the highest median price, the 2nd highest number of units sold, and the 2nd highest price per square foot.
*Average over past 3 years
Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Wednesday, November 10, 2010
Tuesday, November 9, 2010
Aqua Wins Awards
Aqua was one of the big winners last week - receiving an Honor Award at the annual Design Excellence Awards gathering of the American Institute of Architects - the highest form of recognition in the "distinguished building category." Aqua was also named the world's best skyscraper in 2009 by the German-based building database Emporis.
Aqua has also been selected as one of five finalists for the 4th International Highrise Award. It is the only U.S. representative. The finalists were selected in Frankfurt/Main, Germany by an international jury of architects, engineers and property specialists. The other finalists are from Dubai, Tokyo, Bangkok, and Shanghai. The five finalists were selected for demonstrating "a positive trend that has the opportunity of exploring new building forms."
The 334-room hotel venture in Aqua has obtained a $66 million loan to finance the project and construction has started. The Radisson Blu, a new upscale brand run by Carlson Hotels Worldwide is scheduled to open next September - it is the first Raddison Blu Hotel in the U.S.
Aqua has also been selected as one of five finalists for the 4th International Highrise Award. It is the only U.S. representative. The finalists were selected in Frankfurt/Main, Germany by an international jury of architects, engineers and property specialists. The other finalists are from Dubai, Tokyo, Bangkok, and Shanghai. The five finalists were selected for demonstrating "a positive trend that has the opportunity of exploring new building forms."
The 334-room hotel venture in Aqua has obtained a $66 million loan to finance the project and construction has started. The Radisson Blu, a new upscale brand run by Carlson Hotels Worldwide is scheduled to open next September - it is the first Raddison Blu Hotel in the U.S.
Friday, November 5, 2010
Home Prices Stabilizing in Key Markets
Chicago's Loop is #3 Nationally!! Two of the top three are Chicago!
ZipRealty says in its third quarter report that homes in key markets all over the country are selling above the asking price.
The report shows that the spread between the sales-to-list price ratio lessened significantly in most markets, but high-end housing markets in many areas continued to offer great bargains for buyers.
The 10 hottest ZIP codes in the ZipRealty markets where the selling prices was greater than the asking price were:
1. Greater Grand Crossing – Chicago, Ill. (60619)
2. Oakland, Calif. (94603)
3. The Loop – Chicago, Ill. (60603)
ZipRealty says in its third quarter report that homes in key markets all over the country are selling above the asking price.
The report shows that the spread between the sales-to-list price ratio lessened significantly in most markets, but high-end housing markets in many areas continued to offer great bargains for buyers.
The 10 hottest ZIP codes in the ZipRealty markets where the selling prices was greater than the asking price were:
1. Greater Grand Crossing – Chicago, Ill. (60619)
2. Oakland, Calif. (94603)
3. The Loop – Chicago, Ill. (60603)
Thursday, November 4, 2010
Real Estate Revisited, Part 4
WHAT PLANNERS SEE
Regardless of whether home prices will stabilize or whether they'll fall further, many financial planners will be discussing expectations about home purchases and sales at client meetings. "The demand for housing has not gone away," says Jane King, president of Fairfield Financial Advisors in Wellesley, Mass. "People still want to own their own home or have a second home."
She adds that when a client wants to buy a home, her firm will model the purchase. "We'll show clients how buying the place will affect liquidity and the income they can expect in retirement."
The housing slump of the past few years has had a visible impact, though. "There's not as much euphoria among buyers as there was a few years ago," King explains. "They're more likely to offer a certain amount-what they think is a fair price-and then back off if the seller doesn't accept."
King recounts the story of a client negotiating to buy a second home now, from an estate. He offered $650,000; the seller wants $800,000. If the seller won't come down, she says her client will walk away from the deal. He doesn't think that there is a line of buyers who will be bidding against him, so the seller might reduce the asking price.
According to King, her clients who are looking to buy a home are not so worried about whether we've finally reached the absolute bottom in the housing market. "Buyers aren't concerned about prices going down more in the next year or two," she says. "They're in it for the long term, not to flip houses."
SELLER'S REMORSE
However, many home buyers are sellers too; they're moving up or down in the housing market. And not every would-be buyer is an eager seller.
Marc Freedman, who heads a financial planning firm in Peabody, Mass., says some of his clients are thinking about selling their house and downsizing. They might want to move into a retirement community, where they won't have to do as much home maintenance. However, a lot of them are reluctant to sell now because they don't think they'll get the price they want-they have a certain number in their heads as to what their houses are worth.
That number, unfortunately, might be based on what similar homes sold for in 2005 or 2006. Few sellers will get such a price now, so they're holding on to their present house. "Often, they don't realize how much it's costing them to stay there," Freedman says.
Those costs are not just the obvious ones, such as property tax and homeowner's insurance, according to Freedman. Clients also have maintenance costs, including landscaping and plowing. They may be paying a great deal for heating and electricity, especially if they're still living in the big house where they raised their kids. Freedman adds that some of his clients pay a great deal for expenses related to their home swimming pool, even though they might use it no more than three or four times a year."
Clients who are unwilling to sell might be greedy. In addition, they might be looking for an excuse not to pack up a house, Freedman says. "If clients are downsizing, they might be worried about fitting everything into a smaller home."
As Paul Gydosh Jr., managing director of Kensington Wealth Partners in Columbus, Ohio, points out, "Clients who want to sell one home and buy another have several options. They might wait to sell at a higher price, carry the costs of two homes (if they can afford it), rent their former home or sell it to their kids. The most common solution is to reduce their asking price, sell the old home and buy a new one."
Gydosh explores all the options with clients, helping them come to a conclusion. "We've seen instances where a home seller was frozen over a small gap between his asking price and the bid, and we pointed out how little a difference that would make in his net worth," he says.
In some Midwestern cities like Columbus, neither the housing boom nor the bust was as extreme as it was in other areas of the U. S. "Sellers here might not be so anchored to the price they believe their home is worth," Gydosh says. Therefore, they might not be as reluctant to lower their price to close a sale.
Even though sellers will likely have to accept a lower selling price, they could get a good price on the place they buy in today's market. Gydosh tells of a homeowner who sold his place for 10%-15% below the peak price and bought a house down the street for a 30% discount from the peak. "The new home has more square footage, and is also better suited for the wife's elderly mother to live with them."
Even outside the Midwest, there are areas where housing prices have held up relatively well. "Around here, home prices are down 5% to 15% from the peak," says Eleanore Szymanski, principal at EKS Associates, a financial planning firm in Princeton, N.J. "At today's levels, some clients are willing to sell-and they're able to. One $700,000 home sold in three weeks; the sale fell through because of mortgage problems. When the house went back on the market it sold again, in another three weeks."
As Szymanski's anecdote indicates, lenders' extreme caution may be jeopardizing home sales now. "They're putting loan applicants through the ringer," she says. "Clients who are thinking about selling their home expect prices to move up, probably within the next three to five years, which could happen once the banks loosen up a bit." A return to the days of mortgages-for-anyone may not be desirable, but the residential housing market might look a lot healthier if lenders were as reasonable about the loans they make as they seem to be about the properties they have to sell.
By Donald Jay Korn
Read Part 1 Part 2 Part 3
Regardless of whether home prices will stabilize or whether they'll fall further, many financial planners will be discussing expectations about home purchases and sales at client meetings. "The demand for housing has not gone away," says Jane King, president of Fairfield Financial Advisors in Wellesley, Mass. "People still want to own their own home or have a second home."
She adds that when a client wants to buy a home, her firm will model the purchase. "We'll show clients how buying the place will affect liquidity and the income they can expect in retirement."
The housing slump of the past few years has had a visible impact, though. "There's not as much euphoria among buyers as there was a few years ago," King explains. "They're more likely to offer a certain amount-what they think is a fair price-and then back off if the seller doesn't accept."
King recounts the story of a client negotiating to buy a second home now, from an estate. He offered $650,000; the seller wants $800,000. If the seller won't come down, she says her client will walk away from the deal. He doesn't think that there is a line of buyers who will be bidding against him, so the seller might reduce the asking price.
According to King, her clients who are looking to buy a home are not so worried about whether we've finally reached the absolute bottom in the housing market. "Buyers aren't concerned about prices going down more in the next year or two," she says. "They're in it for the long term, not to flip houses."
SELLER'S REMORSE
However, many home buyers are sellers too; they're moving up or down in the housing market. And not every would-be buyer is an eager seller.
Marc Freedman, who heads a financial planning firm in Peabody, Mass., says some of his clients are thinking about selling their house and downsizing. They might want to move into a retirement community, where they won't have to do as much home maintenance. However, a lot of them are reluctant to sell now because they don't think they'll get the price they want-they have a certain number in their heads as to what their houses are worth.
That number, unfortunately, might be based on what similar homes sold for in 2005 or 2006. Few sellers will get such a price now, so they're holding on to their present house. "Often, they don't realize how much it's costing them to stay there," Freedman says.
Those costs are not just the obvious ones, such as property tax and homeowner's insurance, according to Freedman. Clients also have maintenance costs, including landscaping and plowing. They may be paying a great deal for heating and electricity, especially if they're still living in the big house where they raised their kids. Freedman adds that some of his clients pay a great deal for expenses related to their home swimming pool, even though they might use it no more than three or four times a year."
Clients who are unwilling to sell might be greedy. In addition, they might be looking for an excuse not to pack up a house, Freedman says. "If clients are downsizing, they might be worried about fitting everything into a smaller home."
As Paul Gydosh Jr., managing director of Kensington Wealth Partners in Columbus, Ohio, points out, "Clients who want to sell one home and buy another have several options. They might wait to sell at a higher price, carry the costs of two homes (if they can afford it), rent their former home or sell it to their kids. The most common solution is to reduce their asking price, sell the old home and buy a new one."
Gydosh explores all the options with clients, helping them come to a conclusion. "We've seen instances where a home seller was frozen over a small gap between his asking price and the bid, and we pointed out how little a difference that would make in his net worth," he says.
In some Midwestern cities like Columbus, neither the housing boom nor the bust was as extreme as it was in other areas of the U. S. "Sellers here might not be so anchored to the price they believe their home is worth," Gydosh says. Therefore, they might not be as reluctant to lower their price to close a sale.
Even though sellers will likely have to accept a lower selling price, they could get a good price on the place they buy in today's market. Gydosh tells of a homeowner who sold his place for 10%-15% below the peak price and bought a house down the street for a 30% discount from the peak. "The new home has more square footage, and is also better suited for the wife's elderly mother to live with them."
Even outside the Midwest, there are areas where housing prices have held up relatively well. "Around here, home prices are down 5% to 15% from the peak," says Eleanore Szymanski, principal at EKS Associates, a financial planning firm in Princeton, N.J. "At today's levels, some clients are willing to sell-and they're able to. One $700,000 home sold in three weeks; the sale fell through because of mortgage problems. When the house went back on the market it sold again, in another three weeks."
As Szymanski's anecdote indicates, lenders' extreme caution may be jeopardizing home sales now. "They're putting loan applicants through the ringer," she says. "Clients who are thinking about selling their home expect prices to move up, probably within the next three to five years, which could happen once the banks loosen up a bit." A return to the days of mortgages-for-anyone may not be desirable, but the residential housing market might look a lot healthier if lenders were as reasonable about the loans they make as they seem to be about the properties they have to sell.
By Donald Jay Korn
Read Part 1 Part 2 Part 3
Wednesday, November 3, 2010
Real Estate Revisited, Part 3
LOCATION, LOCATION
Molony's comments bring up a crucial point about housing prices. National data may be interesting, but it's not very helpful for planners advising clients who want to buy or sell a house on a specific lot. Lately housing price movements have varied enormously from place to place. The chart, "Regional Differences," on page 76, shows NAR's regional data on median sales prices of existing single-family homes.
As these numbers show, price declines in the western states over the last two years have been far steeper than in other regions of the United States, reflecting the huge boom in certain markets in previous years. Prices in the West plummeted 37% from 2007 through 2009. In many areas of the South and Midwest, however, prices did not go through a boom and bust in the early years of this century, so they may already be at or near the bottom of this cycle. Prices in the South fell 13.3% over the last two years, while prices in the Midwest were only down 11.5%
The shadow inventory threat will be most ominous in the areas with the greatest portion of distressed homeowners. RealtyTrac reports that California and Florida alone accounted for about 37% of all national foreclosure filings in August 2010. In areas with less speculative building and fewer distressed homeowners, the shadow cast by future housing supply might not be as long.
BALANCING ACT
The question is whether today's buyers should wait, for fear that shadow inventory will drag down prices even further in the next few years. Yun points to a hopeful indicator on the supply side.
"One aspect of the shadow inventory that people aren't talking about is the lack of inventory of newly constructed homes," he says. In a normal year, Yun explains, there is always a flow of new homes hitting the market that needs to be absorbed. But in today's market, the low level of housing starts has cut off the normal flow of new home inventory. "So the low number of new homes will help offset shadow inventory, providing some help in the overall inventory picture."
Luschini concurs that weak housing starts are good news for home prices. "We don't need more inventory now."
What's more, it may be unrealistic to expect millions of homes will be dumped on the market in the next few years, driving down prices. Lenders who find themselves overstocked with real estate-owned (REO) property are being cautious. "On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate," Saccacio says. "On the back-end, the dammed-up inventory of properties already in foreclosure is moving to REO in a steady stream rather than a flood-presumably to prevent further erosion of home prices."
Luschini also sees evidence of efforts to keep housing supply and demand on an even keel. "Many homes are owned by banks, ready to come back on the market," he says. "Banks don't want to be in the business of owning homes. At the same time, they are reluctant to bring too many homes to the market, for fear of exacerbating weakness in home prices."
Thus lenders may be both reluctant home owners and reluctant home sellers. "We see a tug-of-war," Luschini explains. "As the economic recovery continues, more homes will come to market from banks and other owners. This increased supply will keep prices down." On the other end of the rope, when excess supply threatens to pull prices down, banks may rein in the supply of foreclosed properties so that prices can firm up. Arnott agrees that such activity is "clearly going on" and will put a damper on housing prices.
Luschini concludes that home prices are likely to stay "flattish" for several years. The inventory will find its way onto the market, and there will be some continued softness. "Home prices might drop 5% or so, nationwide, but the price drops won't be anything like we've seen in the past few years," he predicts, adding that because the housing market is highly regionalized, some areas of the country may see higher prices while others suffer steeper drops.
What might put housing prices on solid footing? "The answer to price stability is more jobs," Luschini says "When more people are working, more people will be able to commit to service the debt that comes with home ownership." With unemployment still well over 9%, it may be awhile before housing prices can resume an upward surge. In the meantime, the national housing price indexes mighty not stray far from current levels as lenders expand and contract the supply of REO properties coming onto the market.
How might a foreclosure moratorium affect housing prices? In the short term, it could stem further housing price declines because it would preclude new inventory from hitting the market, according to Luschini.
In the longer term, supply will surge once the moratorium is lifted, and prices will fall, says Feifei Li, director of research at Research Affiliates. "The moratorium won't make troubled homes disappear. They will hit the market eventually and cause a big spike in supply, driving prices down further."
By Donald Jay Korn
Catch the conclusion in Part 4 tomorrow!
Miss Part 1 or Part 2? Read them now!
Molony's comments bring up a crucial point about housing prices. National data may be interesting, but it's not very helpful for planners advising clients who want to buy or sell a house on a specific lot. Lately housing price movements have varied enormously from place to place. The chart, "Regional Differences," on page 76, shows NAR's regional data on median sales prices of existing single-family homes.
As these numbers show, price declines in the western states over the last two years have been far steeper than in other regions of the United States, reflecting the huge boom in certain markets in previous years. Prices in the West plummeted 37% from 2007 through 2009. In many areas of the South and Midwest, however, prices did not go through a boom and bust in the early years of this century, so they may already be at or near the bottom of this cycle. Prices in the South fell 13.3% over the last two years, while prices in the Midwest were only down 11.5%
The shadow inventory threat will be most ominous in the areas with the greatest portion of distressed homeowners. RealtyTrac reports that California and Florida alone accounted for about 37% of all national foreclosure filings in August 2010. In areas with less speculative building and fewer distressed homeowners, the shadow cast by future housing supply might not be as long.
BALANCING ACT
The question is whether today's buyers should wait, for fear that shadow inventory will drag down prices even further in the next few years. Yun points to a hopeful indicator on the supply side.
"One aspect of the shadow inventory that people aren't talking about is the lack of inventory of newly constructed homes," he says. In a normal year, Yun explains, there is always a flow of new homes hitting the market that needs to be absorbed. But in today's market, the low level of housing starts has cut off the normal flow of new home inventory. "So the low number of new homes will help offset shadow inventory, providing some help in the overall inventory picture."
Luschini concurs that weak housing starts are good news for home prices. "We don't need more inventory now."
What's more, it may be unrealistic to expect millions of homes will be dumped on the market in the next few years, driving down prices. Lenders who find themselves overstocked with real estate-owned (REO) property are being cautious. "On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate," Saccacio says. "On the back-end, the dammed-up inventory of properties already in foreclosure is moving to REO in a steady stream rather than a flood-presumably to prevent further erosion of home prices."
Luschini also sees evidence of efforts to keep housing supply and demand on an even keel. "Many homes are owned by banks, ready to come back on the market," he says. "Banks don't want to be in the business of owning homes. At the same time, they are reluctant to bring too many homes to the market, for fear of exacerbating weakness in home prices."
Thus lenders may be both reluctant home owners and reluctant home sellers. "We see a tug-of-war," Luschini explains. "As the economic recovery continues, more homes will come to market from banks and other owners. This increased supply will keep prices down." On the other end of the rope, when excess supply threatens to pull prices down, banks may rein in the supply of foreclosed properties so that prices can firm up. Arnott agrees that such activity is "clearly going on" and will put a damper on housing prices.
Luschini concludes that home prices are likely to stay "flattish" for several years. The inventory will find its way onto the market, and there will be some continued softness. "Home prices might drop 5% or so, nationwide, but the price drops won't be anything like we've seen in the past few years," he predicts, adding that because the housing market is highly regionalized, some areas of the country may see higher prices while others suffer steeper drops.
What might put housing prices on solid footing? "The answer to price stability is more jobs," Luschini says "When more people are working, more people will be able to commit to service the debt that comes with home ownership." With unemployment still well over 9%, it may be awhile before housing prices can resume an upward surge. In the meantime, the national housing price indexes mighty not stray far from current levels as lenders expand and contract the supply of REO properties coming onto the market.
How might a foreclosure moratorium affect housing prices? In the short term, it could stem further housing price declines because it would preclude new inventory from hitting the market, according to Luschini.
In the longer term, supply will surge once the moratorium is lifted, and prices will fall, says Feifei Li, director of research at Research Affiliates. "The moratorium won't make troubled homes disappear. They will hit the market eventually and cause a big spike in supply, driving prices down further."
By Donald Jay Korn
Catch the conclusion in Part 4 tomorrow!
Miss Part 1 or Part 2? Read them now!
Tuesday, November 2, 2010
Real Estate Revisited, Part 2
ONLY THE SHADOW KNOWS
Not everyone is convinced that statistics tell the whole story, though. A scan of press reports produced more skeptics than adherents of the idea that home prices have reached a bottom. A recent Bloomberg article, for example, found only two votes for near-term stability, while five other experts saw prices falling by as much as 15% over the next few years.
Why the doom and gloom amid encouraging data? One reason is the threat of a "double-dip" recession. "We think a second round is reasonably likely," says Rob Arnott, chairman of Research Affiliates in Newport Beach, Calif. According to Arnott, just the threat of a tax boost could cause affluent consumers to spend less and turn a fragile recovery into a renewed recession. That would be troublesome for housing prices, which could fall another 10%-20%. "We don't see a bottom in housing prices until 2012," he says.
Arnott also mentions the huge "overhang" of houses that are in or near foreclosure as a factor that will increase the supply of homes on the market and thus put a lid on prices. This is the so-called shadow inventory of properties that are not on the market now but soon may be on sale. Some of those properties are held by banks after a foreclosure; others still belong to homeowners in some pre-foreclosure stage.
By some estimates, this shadow inventory is as large as seven million homes, which could go on the market in the next few years. Today, there are about four million existing homes for sale in the United States. If seven million homes are added, more than doubling for-sale listings, the surplus of sellers over buyers could drive down home prices even further, bearish forecasters predict.
WHERE CREDIT WAS DUE
Besides the shadow inventory, bears on housing prices point to another reason for doubting the staying power of recent home price stability-the expiration of housing tax credits. Throughout 2009 and into the second quarter of 2010, certain home buyers qualified for federal income tax savings of up to $8,000. According to NAR, an estimated 4.3 million home buyers were eligible to use the tax credits, including one million who might not have bought without the tax break.
If those million home buyers had kept their checkbooks closed, leaving an extra million homes on the market, prices probably would not have stabilized in 2009-2010. Now that the tax credits have expired, with no apparent renewal in sight, will flagging demand lead to a resumption of home price declines? "We see some footing in housing prices, but we're not far enough from the housing tax credits to see how solid the bottom is," Luschini says.
Perhaps the lack of tax credits won't cause a double-dip in home prices. "Our forecast for 2010 is for home prices to be essentially unchanged nationally from 2009," says Walter Molony, a spokesman for NAR. "Unless home sales remain depressed for more than a few months, we don't expect an impact on prices. Prices have overcorrected in some areas; homes are selling for less than replacement construction costs in many markets."
By: Donald Jay Korn
Check in tomorrow for Part 3!
Missed Part 1? Read it here?
Not everyone is convinced that statistics tell the whole story, though. A scan of press reports produced more skeptics than adherents of the idea that home prices have reached a bottom. A recent Bloomberg article, for example, found only two votes for near-term stability, while five other experts saw prices falling by as much as 15% over the next few years.
Why the doom and gloom amid encouraging data? One reason is the threat of a "double-dip" recession. "We think a second round is reasonably likely," says Rob Arnott, chairman of Research Affiliates in Newport Beach, Calif. According to Arnott, just the threat of a tax boost could cause affluent consumers to spend less and turn a fragile recovery into a renewed recession. That would be troublesome for housing prices, which could fall another 10%-20%. "We don't see a bottom in housing prices until 2012," he says.
Arnott also mentions the huge "overhang" of houses that are in or near foreclosure as a factor that will increase the supply of homes on the market and thus put a lid on prices. This is the so-called shadow inventory of properties that are not on the market now but soon may be on sale. Some of those properties are held by banks after a foreclosure; others still belong to homeowners in some pre-foreclosure stage.
By some estimates, this shadow inventory is as large as seven million homes, which could go on the market in the next few years. Today, there are about four million existing homes for sale in the United States. If seven million homes are added, more than doubling for-sale listings, the surplus of sellers over buyers could drive down home prices even further, bearish forecasters predict.
WHERE CREDIT WAS DUE
Besides the shadow inventory, bears on housing prices point to another reason for doubting the staying power of recent home price stability-the expiration of housing tax credits. Throughout 2009 and into the second quarter of 2010, certain home buyers qualified for federal income tax savings of up to $8,000. According to NAR, an estimated 4.3 million home buyers were eligible to use the tax credits, including one million who might not have bought without the tax break.
If those million home buyers had kept their checkbooks closed, leaving an extra million homes on the market, prices probably would not have stabilized in 2009-2010. Now that the tax credits have expired, with no apparent renewal in sight, will flagging demand lead to a resumption of home price declines? "We see some footing in housing prices, but we're not far enough from the housing tax credits to see how solid the bottom is," Luschini says.
Perhaps the lack of tax credits won't cause a double-dip in home prices. "Our forecast for 2010 is for home prices to be essentially unchanged nationally from 2009," says Walter Molony, a spokesman for NAR. "Unless home sales remain depressed for more than a few months, we don't expect an impact on prices. Prices have overcorrected in some areas; homes are selling for less than replacement construction costs in many markets."
By: Donald Jay Korn
Check in tomorrow for Part 3!
Missed Part 1? Read it here?
Monday, November 1, 2010
Real Estate Revisited
Real Estate Revisited
By Donald Jay Korn
Have real estate prices finally hit bottom? As far as home prices go, the data says they have. Prices are up across the board in 2010 compared to 2009. Many observers are doubtful, however, predicting further slippage. The pessimists point to the possibility of a double-dip recession, the expiration of housing tax credits and an increase in shadow inventory, as more troubled properties flood the market.
In fact, that inventory may be coming out of the shadows. There were more foreclosures this summer than in any three-month period since the housing bust began in 2006, according to RealtyTrac, a foreclosure listing service. Banks seized 288,345 properties in July through September, and are on pace to foreclose on 1.2 million homes by the end of 2010.
But the pipeline may slow due to a coordinated probe by the top prosecutors in all 50 states into improper foreclosures by the nation's largest loan servicers. The investigation comes after lawyers accused mortgage lenders of "robo-signing," or signing off on foreclosure documents without reviewing them as required by law.
Although the prosecutors have not called for mortgage lenders to freeze all foreclosures, mortgage lenders are taking various measures to ensure that their foreclosures are legal. As we went to press, Bank of America had halted foreclosure sales in all 50 states for a few weeks in October, and GMAC Mortgage and JPMorgan Chase stopped them in the 23 states that require court approval to complete foreclosures.
While the implications of these developments play out in the short term, it is becoming clear that lenders who have become major property owners, by default, may be manipulating the current housing cycle. "There are clear indications that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers," says James Saccacio, CEO of RealtyTrac in Irvine, Calif. In the longer term, such management might promote price stability (or stagnation, depending on one's point of view), both short- and long-term.
THE GOOD NEWS
According to the National Association of Realtors (NAR), the median sales price of existing family homes peaked in 2006 at $221,900. In 2009, that median price was $172,100-a drop of more than 22%. In the first seven months of 2010, the monthly medians ranged from $163,800 to $183,500, with the latest month (July) at $183,400. From July 2009 to July 2010, the median price was up 0.9%. Home prices in two out of four regions were up less than 5%, year over year, while the other two were down no more than 3%. Anyone looking for a statistical example of stability has found it.
Further evidence that housing prices have found a bottom comes from the Case Shiller 20-City Home Price Index. In the latest month to report-July 2010-prices were up 3.2% from a year earlier. "Ten of the 20 cities saw year-over-year gains and only one (Las Vegas) made a new bottom," says David Blitzer, chairman of the index committee at Standard & Poor's. "Judging from the recent behavior of the housing market, stable prices seem more likely" than a return to the lofty levels of 2005-2006.
Some industry observers are encouraged by these statistics. "Home values have shown stabilizing trends over the past year," says Lawrence Yun, the chief economist at NAR. He credits home-buyer tax credits for stimulating sales and bolstering prices.
Yun adds that houses have become more affordable in today's market. According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, 72.3% of the homes sold in the second quarter of 2010 were affordable to families earning the national median income of $64,400. That's just a shade below the historic peak of 72.5%, in the first quarter of 2009, and far above the level of three years ago, when less than half of the families earning the median income could afford the median-priced home.
"Residential housing may be quite inexpensive now, with prices down and the low cost of servicing debt," says Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "The huge number of homes for sale just adds to the appeal of a buyer's market," he says.
Besides lower home prices, record low interest rates are helping to make housing more affordable. In mid-October, rates on 30-year fixed mortgages remained below 5%, the lowest level since May of 2009, when 30-year rates settled at 4.81%.
By Donald Jay Korn
Have real estate prices finally hit bottom? As far as home prices go, the data says they have. Prices are up across the board in 2010 compared to 2009. Many observers are doubtful, however, predicting further slippage. The pessimists point to the possibility of a double-dip recession, the expiration of housing tax credits and an increase in shadow inventory, as more troubled properties flood the market.
In fact, that inventory may be coming out of the shadows. There were more foreclosures this summer than in any three-month period since the housing bust began in 2006, according to RealtyTrac, a foreclosure listing service. Banks seized 288,345 properties in July through September, and are on pace to foreclose on 1.2 million homes by the end of 2010.
But the pipeline may slow due to a coordinated probe by the top prosecutors in all 50 states into improper foreclosures by the nation's largest loan servicers. The investigation comes after lawyers accused mortgage lenders of "robo-signing," or signing off on foreclosure documents without reviewing them as required by law.
Although the prosecutors have not called for mortgage lenders to freeze all foreclosures, mortgage lenders are taking various measures to ensure that their foreclosures are legal. As we went to press, Bank of America had halted foreclosure sales in all 50 states for a few weeks in October, and GMAC Mortgage and JPMorgan Chase stopped them in the 23 states that require court approval to complete foreclosures.
While the implications of these developments play out in the short term, it is becoming clear that lenders who have become major property owners, by default, may be manipulating the current housing cycle. "There are clear indications that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers," says James Saccacio, CEO of RealtyTrac in Irvine, Calif. In the longer term, such management might promote price stability (or stagnation, depending on one's point of view), both short- and long-term.
THE GOOD NEWS
According to the National Association of Realtors (NAR), the median sales price of existing family homes peaked in 2006 at $221,900. In 2009, that median price was $172,100-a drop of more than 22%. In the first seven months of 2010, the monthly medians ranged from $163,800 to $183,500, with the latest month (July) at $183,400. From July 2009 to July 2010, the median price was up 0.9%. Home prices in two out of four regions were up less than 5%, year over year, while the other two were down no more than 3%. Anyone looking for a statistical example of stability has found it.
Further evidence that housing prices have found a bottom comes from the Case Shiller 20-City Home Price Index. In the latest month to report-July 2010-prices were up 3.2% from a year earlier. "Ten of the 20 cities saw year-over-year gains and only one (Las Vegas) made a new bottom," says David Blitzer, chairman of the index committee at Standard & Poor's. "Judging from the recent behavior of the housing market, stable prices seem more likely" than a return to the lofty levels of 2005-2006.
Some industry observers are encouraged by these statistics. "Home values have shown stabilizing trends over the past year," says Lawrence Yun, the chief economist at NAR. He credits home-buyer tax credits for stimulating sales and bolstering prices.
Yun adds that houses have become more affordable in today's market. According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, 72.3% of the homes sold in the second quarter of 2010 were affordable to families earning the national median income of $64,400. That's just a shade below the historic peak of 72.5%, in the first quarter of 2009, and far above the level of three years ago, when less than half of the families earning the median income could afford the median-priced home.
"Residential housing may be quite inexpensive now, with prices down and the low cost of servicing debt," says Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "The huge number of homes for sale just adds to the appeal of a buyer's market," he says.
Besides lower home prices, record low interest rates are helping to make housing more affordable. In mid-October, rates on 30-year fixed mortgages remained below 5%, the lowest level since May of 2009, when 30-year rates settled at 4.81%.
Wednesday, August 25, 2010
Tuesday, August 24, 2010
Chicago Home Sales
So - several of my clients sent me this article and asked for my comments. I thought I would share this with you too! If a few ask, perhaps more would like to know....
Here you go: Averages are meaningless in our specific luxury market - we are not in the slightest changed by the drop in the $8k tax credit as none of our buyers are in that market. As always, the important information to study for your particular sale or purchase is- building by building and then tier by tier within that building. Nothing else is relevant.
As an example, most units at Trump and Heritage are up 20% over 6 months ago if they are in the prime tiers. In the not prime tiers, it is another story. In some of our other buildings, sales prices are lower by as much as 20%, but there are usually additional reasons - assessments got too high, a special need or special assessment got bad word of mouth going, too many desperate sellers...reasons. But proper marketing and patience gets the job done.
Building by building, tier by tier.
Our Fox Group sales numbers this year are excellent. Out of 5,000 Keller Williams Groups nation-wide, we performed #3. Why? Luxury market, direct marketing techniques, not relying on the old way of doing business. Half of our sales are "on us", meaning we find the buyers through direct means. A lot of luxury buyers are interested in buying "up", enjoying a finer home in a somewhat uncertain economy. While our year would be LOTS better if interested buyers could sell their own homes (Domino Effect), we have some who either have successfully sold or who are buying without selling first.
Person by person, building by building, tier by tier.
We are bullish on our market segment and our numbers show it! Do sellers need patience? Yes. Are lowest price units selling first? Yes again. In my 20 years in real estate, I have never seen a better chance to buy. And if that means savvy, informed sellers may take a little less, then that dictates that they should do that - and buy into the best market they are likely to see in their lifetimes. Sell for less, buy for less still. And buy well so you can appreciate value increase over time.
Basics. Location, location, location? NO! Value, Value, Value.
Here you go: Averages are meaningless in our specific luxury market - we are not in the slightest changed by the drop in the $8k tax credit as none of our buyers are in that market. As always, the important information to study for your particular sale or purchase is- building by building and then tier by tier within that building. Nothing else is relevant.
As an example, most units at Trump and Heritage are up 20% over 6 months ago if they are in the prime tiers. In the not prime tiers, it is another story. In some of our other buildings, sales prices are lower by as much as 20%, but there are usually additional reasons - assessments got too high, a special need or special assessment got bad word of mouth going, too many desperate sellers...reasons. But proper marketing and patience gets the job done.
Building by building, tier by tier.
Our Fox Group sales numbers this year are excellent. Out of 5,000 Keller Williams Groups nation-wide, we performed #3. Why? Luxury market, direct marketing techniques, not relying on the old way of doing business. Half of our sales are "on us", meaning we find the buyers through direct means. A lot of luxury buyers are interested in buying "up", enjoying a finer home in a somewhat uncertain economy. While our year would be LOTS better if interested buyers could sell their own homes (Domino Effect), we have some who either have successfully sold or who are buying without selling first.
Person by person, building by building, tier by tier.
We are bullish on our market segment and our numbers show it! Do sellers need patience? Yes. Are lowest price units selling first? Yes again. In my 20 years in real estate, I have never seen a better chance to buy. And if that means savvy, informed sellers may take a little less, then that dictates that they should do that - and buy into the best market they are likely to see in their lifetimes. Sell for less, buy for less still. And buy well so you can appreciate value increase over time.
Basics. Location, location, location? NO! Value, Value, Value.
Thursday, July 8, 2010
CATERING TO SENIORS CAN MAKE YOUR BUSINESS BOOM
Even when business isn’t booming, there are still plenty of opportunities to enter the senior market, especially since baby boomers often seek a simpler way of life regardless of the push or pull of market forces. Boomers are an ever-growing market segment, and they are more active and picky than the 50+ buyers in the past. Whether you’ve been working in the senior market for ages or are just looking to discover its hidden potential, you must understand how to cater to boomers’ needs to tap into a market that may lead you to new success.
Taking the Additional Time to Make a Senior Sale
To meet seniors’ long-term needs, agents and developers say selling to baby boomers often takes longer than selling to younger clients. Lucchetti notes the emotional attachment seniors have to their homes – some of which they have lived in for a lifetime – often leads to a longer lead time before they make the final move.
Hartz notes that senior buyers are often cautious and conservative – particularly in this market. However, they often move quickly when they sell their property as they are ready for the next step in their life and can be cash buyers – a huge plus in any market.
Since the sale can take longer with boomers, agents must be persistent in their communication with clients. Thompson uses newsletters and community outreach to stay in contact with seniors, while communicating with their relatives through e-mail. She says you must build a relationship over time to gain their trust, which requires you to stay in touch with them frequently.
Just because these clients are more mature, it doesn’t mean they are still living in the dark ages. Tricia Fox of Keller Williams Luxury Homes says she e-mails back and forth with most baby boomer clients, and occasionally texts with those savvy enough to do so. Find out which method of communication works best for the client, and proceed accordingly.
“Knowing the effects that arthritis, as well as loss of hearing and vision, can have on communication and decision making has a big impact on how you deal with boomers and other seniors,” says Kunicki.
How You Can Benefit from Boomer Business
Despite all the additional work required, Fox says the senior market is the “best market” to be in at the moment, as many seniors are buying a second home or downsizing and embracing the Chicago area.
While it is not always true, oftentimes boomers are the ones out there with money to spend. Boomer Project founder/president Matt Thornhill claims that the over-50 crowd outspends the under-50 crowd by $400 billion. Additionally, the latest survey conducted by ProMatura Group found that 50+ sentiment is on the rise, and that 50+ primary home purchases have risen by 5 percent. With more years in the workforce, boomers have the potential to spend a lot more money on their next step in life.
With Social Security no longer a primary source of income for many boomers, there is a growing trend of delaying retirement. The Del Webb survey found that boomers turning 50 this year plan to retire a median of four years later than 50 year olds in 1996, at age 67 versus 63. Among the younger boomers, 72 percent plan to work in some fashion during their retirement years. With more and more seniors continuing to work and putting off retirement, many are no longer interested in communities that are far from employment opportunities.
When it comes to the bottom line, most agents claim the commission in the senior market is comparable to the pre-retirement age market. Additionally, some independent senior communities offering rental properties, such as LaGrange Pointe in LaGrange, provide commission to agents.
Overall, boomers and seniors are not a market to be ignored. The U.S. Census states that the over-50 crowd will grow 21 percent in size in 10 years, while the 18 to 49 population will remain the same size. As the number increases, so do your opportunities to find additional clients – and sales. Those who cater to the senior market may find that their business grows on all fronts, if they take the time to understand the specific and changing needs of baby boomers and their families.
For the full article click here.
Morgan Phelps, Chicago Agent Magazine
Taking the Additional Time to Make a Senior Sale
To meet seniors’ long-term needs, agents and developers say selling to baby boomers often takes longer than selling to younger clients. Lucchetti notes the emotional attachment seniors have to their homes – some of which they have lived in for a lifetime – often leads to a longer lead time before they make the final move.
Hartz notes that senior buyers are often cautious and conservative – particularly in this market. However, they often move quickly when they sell their property as they are ready for the next step in their life and can be cash buyers – a huge plus in any market.
Since the sale can take longer with boomers, agents must be persistent in their communication with clients. Thompson uses newsletters and community outreach to stay in contact with seniors, while communicating with their relatives through e-mail. She says you must build a relationship over time to gain their trust, which requires you to stay in touch with them frequently.
Just because these clients are more mature, it doesn’t mean they are still living in the dark ages. Tricia Fox of Keller Williams Luxury Homes says she e-mails back and forth with most baby boomer clients, and occasionally texts with those savvy enough to do so. Find out which method of communication works best for the client, and proceed accordingly.
“Knowing the effects that arthritis, as well as loss of hearing and vision, can have on communication and decision making has a big impact on how you deal with boomers and other seniors,” says Kunicki.
How You Can Benefit from Boomer Business
Despite all the additional work required, Fox says the senior market is the “best market” to be in at the moment, as many seniors are buying a second home or downsizing and embracing the Chicago area.
While it is not always true, oftentimes boomers are the ones out there with money to spend. Boomer Project founder/president Matt Thornhill claims that the over-50 crowd outspends the under-50 crowd by $400 billion. Additionally, the latest survey conducted by ProMatura Group found that 50+ sentiment is on the rise, and that 50+ primary home purchases have risen by 5 percent. With more years in the workforce, boomers have the potential to spend a lot more money on their next step in life.
With Social Security no longer a primary source of income for many boomers, there is a growing trend of delaying retirement. The Del Webb survey found that boomers turning 50 this year plan to retire a median of four years later than 50 year olds in 1996, at age 67 versus 63. Among the younger boomers, 72 percent plan to work in some fashion during their retirement years. With more and more seniors continuing to work and putting off retirement, many are no longer interested in communities that are far from employment opportunities.
When it comes to the bottom line, most agents claim the commission in the senior market is comparable to the pre-retirement age market. Additionally, some independent senior communities offering rental properties, such as LaGrange Pointe in LaGrange, provide commission to agents.
Overall, boomers and seniors are not a market to be ignored. The U.S. Census states that the over-50 crowd will grow 21 percent in size in 10 years, while the 18 to 49 population will remain the same size. As the number increases, so do your opportunities to find additional clients – and sales. Those who cater to the senior market may find that their business grows on all fronts, if they take the time to understand the specific and changing needs of baby boomers and their families.
For the full article click here.
Morgan Phelps, Chicago Agent Magazine
Wednesday, July 7, 2010
YTD condo closings up 45% over 2009
In the first six months of this year, condo sales have dramatically increased compared to the first half of 2009. And June closings were up 26% over May.
According to figures generated for ChicagoCondosOnline.com by MRED, the regional MLS, year-to-date sales of Chicago condos through June 2010 are:
* Up 42% in total dollar volume, to $1.8 billion
* Up 45% in units closed, to 5,630
* Down 6% in median sales price, to $263,700
* Down 6% in average market time, to 148 days.
Comparing June sales to May:
* Units closed were up 26%, from 1,083 to 1,365 closings
* Dollar volume was up 27%, from $341 million to $434 million
* Median sales price was up 2%, from $264,900 to $270,000
* Average market time was flat, at 144 days
For details on month-over-month and year-over-year: click here.
For previous market reports: click here.
According to figures generated for ChicagoCondosOnline.com by MRED, the regional MLS, year-to-date sales of Chicago condos through June 2010 are:
* Up 42% in total dollar volume, to $1.8 billion
* Up 45% in units closed, to 5,630
* Down 6% in median sales price, to $263,700
* Down 6% in average market time, to 148 days.
Comparing June sales to May:
* Units closed were up 26%, from 1,083 to 1,365 closings
* Dollar volume was up 27%, from $341 million to $434 million
* Median sales price was up 2%, from $264,900 to $270,000
* Average market time was flat, at 144 days
For details on month-over-month and year-over-year: click here.
For previous market reports: click here.
Thursday, June 24, 2010
Tuesday, June 22, 2010
Chicago home sales jump 32% in May
By: Lorene Yue June 22, 2010, Chicago Business
(Crain's) — More homes were sold in Chicago in May than a year earlier, marking the ninth month in a row of year-over-year gains.
The Illinois Assn. of Realtors reported Tuesday that last month's sales of 2,057 single-family houses and condominiums represented a 32.1% increase from May 2009 sales. The median price also rose, up 2.2% to $230,000, from the same month last year.
The city's May sales uptick was also seen in the greater Chicago area, where 33.6% more homes were sold. The median price for those homes, however, fell, down 4.8% to $190,500.
Illinois home sales were up 27.1%. The median price of the 11,638 homes sold statewide last month was $157,00, a slight increase from the $156,000 median of May 2009.
The National Assn. of Realtors said Midwest home sales remained strong in May as the homebuyers tax credit drove sales nearly 22% higher than in May 2009. The credit called for offers to be made by April 30.
The data released Tuesday show 130,000 sales in the 11-state Midwest region in May. The median home price increased more than 2%, to $150,700.
Midwest sales again rose more than national ones. Nonseasonally adjusted figures show May home sales nationwide increased about 18% over last year.
The Associated Press-Re/Max Monthly Housing Report, which also was released Tuesday, showed home sales increasing in all but one of 12 major Midwestern cities tracked. Fargo, N.D., led the region with a 66% sales jump. Detroit reported the only sales decrease, a 15% drop.
For more information and a breakdown of Chicago area sales click here.
(Crain's) — More homes were sold in Chicago in May than a year earlier, marking the ninth month in a row of year-over-year gains.
The Illinois Assn. of Realtors reported Tuesday that last month's sales of 2,057 single-family houses and condominiums represented a 32.1% increase from May 2009 sales. The median price also rose, up 2.2% to $230,000, from the same month last year.
The city's May sales uptick was also seen in the greater Chicago area, where 33.6% more homes were sold. The median price for those homes, however, fell, down 4.8% to $190,500.
Illinois home sales were up 27.1%. The median price of the 11,638 homes sold statewide last month was $157,00, a slight increase from the $156,000 median of May 2009.
The National Assn. of Realtors said Midwest home sales remained strong in May as the homebuyers tax credit drove sales nearly 22% higher than in May 2009. The credit called for offers to be made by April 30.
The data released Tuesday show 130,000 sales in the 11-state Midwest region in May. The median home price increased more than 2%, to $150,700.
Midwest sales again rose more than national ones. Nonseasonally adjusted figures show May home sales nationwide increased about 18% over last year.
The Associated Press-Re/Max Monthly Housing Report, which also was released Tuesday, showed home sales increasing in all but one of 12 major Midwestern cities tracked. Fargo, N.D., led the region with a 66% sales jump. Detroit reported the only sales decrease, a 15% drop.
For more information and a breakdown of Chicago area sales click here.
Wednesday, June 16, 2010
Monday, June 7, 2010
First 5 Months' Condo Sales Dramatically Increased Compared to 2009
According to figures generated for ChicagoCondosOnline.com by MRED, the regional MLS, year-to-date sales of Chicago condos through May 2010 are:
* Up 47% in total dollar volume, to $1.3 billion
* Up 51% in units closed, to 4,229
* Down 6% in median sales price, to $262,000
* Down 4% in average market time, to 150 days.
Comparing May sales to April:
* Units closed were up 1%, from 1,030 to 1,083 closings
* Dollar volume was up 4%, from $328 million to $341 million
* Median sales price was down 2%, from $270,000 to $264,900
* Average market time was down 6%, from 154 days to 144 days
* Up 47% in total dollar volume, to $1.3 billion
* Up 51% in units closed, to 4,229
* Down 6% in median sales price, to $262,000
* Down 4% in average market time, to 150 days.
Comparing May sales to April:
* Units closed were up 1%, from 1,030 to 1,083 closings
* Dollar volume was up 4%, from $328 million to $341 million
* Median sales price was down 2%, from $270,000 to $264,900
* Average market time was down 6%, from 154 days to 144 days
Tuesday, May 4, 2010
Friday, January 8, 2010
Tuesday, November 10, 2009
Credit buoys sellers' hopes
When Congress voted overwhelmingly Thursday to expand the first-time homebuyer tax credit to include repeat buyers, it brought a ray of hope to segments of the Triangle housing market that have not had much to cheer about of late.
The bill, which awaits President Barack Obama's signature, adds a credit worth up to $6,500 for repeat buyers who have lived in their houses at least five years. The legislation also significantly raises the annual income limits required to be eligible to qualify for the tax credits.
The number of people eligible for the new credit is large, and real estate agents hope it will increase sales of houses that are priced beyond the reach of most first-time buyers.
Laurie Kelly, whose North Raleigh house is on the market for $430,000, is optimistic that the new credit will help her both sell her house and buy one in Virginia.
Kelly's husband recently started a new job in Washington, and the family's house has been for sale since the summer.
The Triangle housing market has a glut of houses priced above $400,000.
"We have a beautiful home," she said. "We just have so much other beautiful competition."
The offers Kelly has gotten have been contingent on the buyers selling their existing homes. Kelly hopes the $6,500 tax credit will help those people sell, which in turn will benefit her.
"It's just a domino effect," she said.
Most people who have taken advantage of the first-time homebuyer tax credit in the Triangle bought houses priced below $300,000, which has greatly reduced the inventory of houses at those price points.
About 1.42 million U.S. taxpayers have qualified for the credit through August, including nearly 45,000 in North Carolina, according to the Internal Revenue Service.
Real-estate agents in the Triangle and across the country had grown increasingly nervous about what might happen if the tax credit were allowed to expire Nov. 30.
In the Triangle, the credit was thought to be the main reason that house sales bottomed out this fall. The number of houses sold during September in Durham, Johnston, Orange and Wake counties was 1,595 - up a half percent from the same period a year ago, Triangle Multiple Listing Services data show.
It was the first year-over-year increase in any month since 2007.
Stacey P. Anfindsen, a Cary appraiser who analyzes MLS data for Triangle real estate agents, said he's doubtful the higher priced homes will receive the same boost from the repeat buyer tax credit.
"There are more people with $50,000 jobs than $200,000 jobs," he said. "If you try creating buyers in the $400,000 and up price range you're really just going back to what we were doing before."
Among the causes of the meltdown in the housing sector were the lax lending standards applied to homebuyers. Anfindsen agrees lenders have stopped making risky loans, but he said the $6,500 tax credit may be small when compared to the decline in personal savings and home values experienced by many.
April, June deadlines
The repeat buyer tax credit is already getting the attention of people who have been casually looking to move into a new home but were not in any hurry. The bill passed by Congress requires that first-time and repeat buyers put homes under contract by April 30 and close by June 30.
Chris Shelton, 32, has been considering selling his North Raleigh townhouse and buying a larger single-family house. Shelton works as a mortgage banker for SunTrust, and he said many of his clients are in the same boat as he is.
"If they were looking now they're really going to want to buy," he said. "It would allow you to knock $6,500 off the price knowing that you're able to get that tax money back."
In voting to extend and expand the first-time homebuyer tax credit, policy makers agreed with the real estate industry that removing the incentive would endanger the housing market's fledging recovery.
"You have a combination right now of the real-estate community not only very pleased but breathing a big sigh of relief," said Ross Rhudy, general manager of Ammons Pittman GMAC Real Estate in Raleigh. "If there's going to be any real recovery in the housing market this was a crucial piece to it."
The question now is when the housing market will reach the stage when such incentives are considered no longer necessary.
Michael Walden, an N.C. State University economist, said that question is increasingly being asked about a number of different government programs that have been launched over the past 18 months to help stabilize the economy.
"The argument for this [program] would be this recession is a residential housing-induced recession and we have to get the residential housing market back on track in order to solidify this emerging economic recovery," Walden said. "You could make the argument that although it's costing us money in the short run, if it is getting us out of the recession quicker it's worth it."
BY DAVID BRACKEN - STAFF WRITER, NewsObserver
The bill, which awaits President Barack Obama's signature, adds a credit worth up to $6,500 for repeat buyers who have lived in their houses at least five years. The legislation also significantly raises the annual income limits required to be eligible to qualify for the tax credits.
The number of people eligible for the new credit is large, and real estate agents hope it will increase sales of houses that are priced beyond the reach of most first-time buyers.
Laurie Kelly, whose North Raleigh house is on the market for $430,000, is optimistic that the new credit will help her both sell her house and buy one in Virginia.
Kelly's husband recently started a new job in Washington, and the family's house has been for sale since the summer.
The Triangle housing market has a glut of houses priced above $400,000.
"We have a beautiful home," she said. "We just have so much other beautiful competition."
The offers Kelly has gotten have been contingent on the buyers selling their existing homes. Kelly hopes the $6,500 tax credit will help those people sell, which in turn will benefit her.
"It's just a domino effect," she said.
Most people who have taken advantage of the first-time homebuyer tax credit in the Triangle bought houses priced below $300,000, which has greatly reduced the inventory of houses at those price points.
About 1.42 million U.S. taxpayers have qualified for the credit through August, including nearly 45,000 in North Carolina, according to the Internal Revenue Service.
Real-estate agents in the Triangle and across the country had grown increasingly nervous about what might happen if the tax credit were allowed to expire Nov. 30.
In the Triangle, the credit was thought to be the main reason that house sales bottomed out this fall. The number of houses sold during September in Durham, Johnston, Orange and Wake counties was 1,595 - up a half percent from the same period a year ago, Triangle Multiple Listing Services data show.
It was the first year-over-year increase in any month since 2007.
Stacey P. Anfindsen, a Cary appraiser who analyzes MLS data for Triangle real estate agents, said he's doubtful the higher priced homes will receive the same boost from the repeat buyer tax credit.
"There are more people with $50,000 jobs than $200,000 jobs," he said. "If you try creating buyers in the $400,000 and up price range you're really just going back to what we were doing before."
Among the causes of the meltdown in the housing sector were the lax lending standards applied to homebuyers. Anfindsen agrees lenders have stopped making risky loans, but he said the $6,500 tax credit may be small when compared to the decline in personal savings and home values experienced by many.
April, June deadlines
The repeat buyer tax credit is already getting the attention of people who have been casually looking to move into a new home but were not in any hurry. The bill passed by Congress requires that first-time and repeat buyers put homes under contract by April 30 and close by June 30.
Chris Shelton, 32, has been considering selling his North Raleigh townhouse and buying a larger single-family house. Shelton works as a mortgage banker for SunTrust, and he said many of his clients are in the same boat as he is.
"If they were looking now they're really going to want to buy," he said. "It would allow you to knock $6,500 off the price knowing that you're able to get that tax money back."
In voting to extend and expand the first-time homebuyer tax credit, policy makers agreed with the real estate industry that removing the incentive would endanger the housing market's fledging recovery.
"You have a combination right now of the real-estate community not only very pleased but breathing a big sigh of relief," said Ross Rhudy, general manager of Ammons Pittman GMAC Real Estate in Raleigh. "If there's going to be any real recovery in the housing market this was a crucial piece to it."
The question now is when the housing market will reach the stage when such incentives are considered no longer necessary.
Michael Walden, an N.C. State University economist, said that question is increasingly being asked about a number of different government programs that have been launched over the past 18 months to help stabilize the economy.
"The argument for this [program] would be this recession is a residential housing-induced recession and we have to get the residential housing market back on track in order to solidify this emerging economic recovery," Walden said. "You could make the argument that although it's costing us money in the short run, if it is getting us out of the recession quicker it's worth it."
BY DAVID BRACKEN - STAFF WRITER, NewsObserver
Tuesday, September 22, 2009
Real Estate Outlook: Recession is Over
Now it's official. The chairman of the Federal Reserve Board himself has said it publicly that it looks like the recession is over.
Here comes the recovery.
But there was a big footnote in Bernanke's speech on the economy last week in Washington: Don't look for a dramatic recovery.
It'll be more like a slow moving, plodding sort of improvement where the economy inches toward expansion. But there'll be no sudden, splashy return to economic boomtime anytime soon.
Bernanke's point about the end of the recession was underscored by a 2.7 percent jump in retail sales for the month of August, according to the Commerce Department.
That's an important indicator because the key to pumping up the economy again is to get consumers spending, and that appears to be happening. Not just for auto sales, which got a big boost in August from the government's "cash for clunkers" program, but also for other key categories, like food and clothing purchases, department store retail, entertainment and restaurant spending, sporting goods.
They were all up for the month, after having been mainly down for well over a year.
One reason for the pick-up in consumer spending: People feel more confident about the direction of the economy in the months ahead. They see the stock market up, so their retirement funds and 401 K plans are bouncing back.
They see home values stabilizing or growing in most areas, so their equity is beginning to increase again.
The one big negative -- and it's definitely a drag for housing -- is the unemployment rate, which Mr. Bernanke said won't be coming down fast, even with the end of the recession.
Nonetheless, the vast majority of Americans who do have jobs have seen their real wages rise this year, up five percent. That's the largest annual gain in fifty years.
All of this is feeding into the housing sector in key markets, such as southern California, where August sales were up 11 percent compared with the year before, according to MDA DataQuick. Even prices are rising slightly.
In the combined markets of Los Angeles, San Diego, Orange County, San Bernadino-Riverside and Ventura, the median price of homes sold gained 2.6 percent in August, which is very encouraging for one of the hardest-hit boom-to-bust areas of the country.
Meanwhile, the mortgage market continues to be exceptionally positive for housing sales and values: 30 year fixed rates averaged just above 5 percent last week, according to the Mortgage Bankers Association, and 15 year loans averaged 4.4 percent.
Published: September 22, 2009
by Kenneth R. Harney
RealtyTimes.com
Tuesday, September 1, 2009
Savvy Buyers use Self-Directed IRA to Buy Homes
Nathan Foran used his self-directed IRA to buy a dilapidated foreclosed house in Richmond for $25,000 cash. Another $25,000 to $35,000 from the retirement account will go toward fixing up the property. He then hopes to rent it out for about $1,000 a month, money that will go straight into his retirement account.
Foran, 40, a San Anselmo real estate broker and investor, sees a lot of advantages in investing in real estate through his individual retirement account.
"The net rental income goes into the IRA, so its generating money tax deferred," he said. "Once I sell, the money also goes directly into the IRA without capital gains tax. If I hold onto it for five to seven years, it probably will be worth in the low $200,000s, so I'll get a sizable gain. If I find another property I think will appreciate faster, I can sell this and use the funds to invest in that one. The IRA is a good long-term investment tool."
With many properties at bargain-basement prices, more people have been turning to their self-directed IRAs as a ready source of capital to make real estate investments. Companies that manage self-directed IRAs say real estate investments by their clients are up as much as 30 percent over the past year.
But experts caution there are a range of potential issues and gotchas -including ones that could even disqualify the entire IRA.
Self-directed IRAs account for just 2 percent of the $4.2 trillion IRA market, but are among its fastest- growing segments. They allow access to a variety of investment vehicles beyond just stocks and bonds. The IRS closely regulates them, and any real estate investments must be handled by IRA custodian firms that hold the property inside the IRA. Can't live in property IRA owners can invest in any kind of real estate - raw land, commercial properties or residential rental properties. They cannot invest in a property they already own or plan to live in, however. The retirement funds "represent a large amount of untapped capital for investors that they can more actively manage," said Brad Hemstreet, vice president of sales and marketing for Equity Trust Co., a Cleveland company with $8 billion of IRA funds under management.
After the recent stock market downturn, "people are pulling out of Wall Street and want investments they understand and are comfortable with," he said. "Many people look at owning a property as a far better investment than owning a stock or bond." Mary Kay Foss, a CPA and director of the Danville office for accounting firm Greenstein, Rogoff, Olsen and Co., said using IRAs to buy real estate can negate many tax advantages. "Real estate is already one of the best investments you can have, tax-wise, because you can deduct all of your expenses, and when you sell it, you pay long-term capital gains (at 15 percent, much lower than income tax)," she said. "But if you have it in an IRA, none of the expenses are deductible. When it's sold, any profit is taxed when you take it out (of the IRA) as ordinary income."
Investing in real estate with a Roth IRA has fewer drawbacks, she said, because distributions are tax-free once the account has been in place for at least five years, although "you still have the downside that you can't deduct any expenses."
Must follow IRS rules. People who invest in real estate through an IRA have to make sure they adhere to IRS rules or they risk disqualifying the account, which carries heavy tax penalties. Neither they nor their relatives can live in the property. They cannot pay any expenses directly; everything from repairs to property taxes must be funded from the IRA. That means they must make sure their IRA has enough liquidity to handle expenses. If they have to add money, they pay a penalty.
"At this price point, I'm able to do the entire transaction with my IRA," Foran said about his $25,000 property. "I wanted to be very safe and make sure I have plenty of buffer in there so I won't have to do a capital contribution to keep that property afloat."
Companies that manage self-directed IRAs said they fully disclose all rules and recommend that investors educate themselves and consult their own accountants.
"Generally people in the real estate IRA business are very savvy about the market and investment properties," said Hugh Bromma, CEO of Oakland's Entrust Group, which has $4 billion in IRA funds under management. "They're picking up selected properties in areas that will be conducive to long-term appreciation."
About 30 percent of Entrust's clients invest in real estate, he said. Foran is among them. Entrust charges $250 a year to manage a single property, plus fees for purchasing the property.
Most IRA real estate investors buy properties with all cash, the simplest approach. If they don't have enough funds to do that, they can partner with other IRA account owners, or even partner with themselves, for instance paying half from their IRA and half from their personal savings. 30% down required a handful of banks offer mortgages to IRA investors, but they must put down at least 30 percent, and they pay a higher interest rate because the loans must be nonrecourse, meaning the banks cannot go after other assets.
Once IRA account holders reach age 70 1/2, they must start taking minimum required distributions from their account. What if they have a house held in the account and can't sell it? "You can take a portion of it and transfer it to yourself," said Kathy Holcomb, business development officer at Pensco Trust Corp., a San Francisco IRA management company.
Suzanne Gregg, an agent with Paragon Real Estate Group in San Francisco, has bought and flipped a couple of properties through her IRA and said she tripled her money.
"It's not like you just buy a stock online and forget about it; it's a little more hands on," she said. "It's a tangible asset you can see and manage."
Tuesday, September 1, 2009 (SF Chronicle)
Carolyn Said, Chronicle Staff Writer
Foran, 40, a San Anselmo real estate broker and investor, sees a lot of advantages in investing in real estate through his individual retirement account.
"The net rental income goes into the IRA, so its generating money tax deferred," he said. "Once I sell, the money also goes directly into the IRA without capital gains tax. If I hold onto it for five to seven years, it probably will be worth in the low $200,000s, so I'll get a sizable gain. If I find another property I think will appreciate faster, I can sell this and use the funds to invest in that one. The IRA is a good long-term investment tool."
With many properties at bargain-basement prices, more people have been turning to their self-directed IRAs as a ready source of capital to make real estate investments. Companies that manage self-directed IRAs say real estate investments by their clients are up as much as 30 percent over the past year.
But experts caution there are a range of potential issues and gotchas -including ones that could even disqualify the entire IRA.
Self-directed IRAs account for just 2 percent of the $4.2 trillion IRA market, but are among its fastest- growing segments. They allow access to a variety of investment vehicles beyond just stocks and bonds. The IRS closely regulates them, and any real estate investments must be handled by IRA custodian firms that hold the property inside the IRA. Can't live in property IRA owners can invest in any kind of real estate - raw land, commercial properties or residential rental properties. They cannot invest in a property they already own or plan to live in, however. The retirement funds "represent a large amount of untapped capital for investors that they can more actively manage," said Brad Hemstreet, vice president of sales and marketing for Equity Trust Co., a Cleveland company with $8 billion of IRA funds under management.
After the recent stock market downturn, "people are pulling out of Wall Street and want investments they understand and are comfortable with," he said. "Many people look at owning a property as a far better investment than owning a stock or bond." Mary Kay Foss, a CPA and director of the Danville office for accounting firm Greenstein, Rogoff, Olsen and Co., said using IRAs to buy real estate can negate many tax advantages. "Real estate is already one of the best investments you can have, tax-wise, because you can deduct all of your expenses, and when you sell it, you pay long-term capital gains (at 15 percent, much lower than income tax)," she said. "But if you have it in an IRA, none of the expenses are deductible. When it's sold, any profit is taxed when you take it out (of the IRA) as ordinary income."
Investing in real estate with a Roth IRA has fewer drawbacks, she said, because distributions are tax-free once the account has been in place for at least five years, although "you still have the downside that you can't deduct any expenses."
Must follow IRS rules. People who invest in real estate through an IRA have to make sure they adhere to IRS rules or they risk disqualifying the account, which carries heavy tax penalties. Neither they nor their relatives can live in the property. They cannot pay any expenses directly; everything from repairs to property taxes must be funded from the IRA. That means they must make sure their IRA has enough liquidity to handle expenses. If they have to add money, they pay a penalty.
"At this price point, I'm able to do the entire transaction with my IRA," Foran said about his $25,000 property. "I wanted to be very safe and make sure I have plenty of buffer in there so I won't have to do a capital contribution to keep that property afloat."
Companies that manage self-directed IRAs said they fully disclose all rules and recommend that investors educate themselves and consult their own accountants.
"Generally people in the real estate IRA business are very savvy about the market and investment properties," said Hugh Bromma, CEO of Oakland's Entrust Group, which has $4 billion in IRA funds under management. "They're picking up selected properties in areas that will be conducive to long-term appreciation."
About 30 percent of Entrust's clients invest in real estate, he said. Foran is among them. Entrust charges $250 a year to manage a single property, plus fees for purchasing the property.
Most IRA real estate investors buy properties with all cash, the simplest approach. If they don't have enough funds to do that, they can partner with other IRA account owners, or even partner with themselves, for instance paying half from their IRA and half from their personal savings. 30% down required a handful of banks offer mortgages to IRA investors, but they must put down at least 30 percent, and they pay a higher interest rate because the loans must be nonrecourse, meaning the banks cannot go after other assets.
Once IRA account holders reach age 70 1/2, they must start taking minimum required distributions from their account. What if they have a house held in the account and can't sell it? "You can take a portion of it and transfer it to yourself," said Kathy Holcomb, business development officer at Pensco Trust Corp., a San Francisco IRA management company.
Suzanne Gregg, an agent with Paragon Real Estate Group in San Francisco, has bought and flipped a couple of properties through her IRA and said she tripled her money.
"It's not like you just buy a stock online and forget about it; it's a little more hands on," she said. "It's a tangible asset you can see and manage."
Tuesday, September 1, 2009 (SF Chronicle)
Carolyn Said, Chronicle Staff Writer
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