RISMEDIA, Oct. 29, 2008-With mortgage meltdowns, plummeting home prices and soaring

foreclosure rates constantly in the news, it’s no wonder people are wary of the housing market these days. But contrary to popular belief, things are not as dismal as they seem, according to Lawrence Yun, chief economist of the National Association of Realtors. Yun debunks 10 commonly held beliefs about the current housing market, and FrontDoor.com offers 10 related tips.

1. Peak-to-trough home price declines to date have been about 20%. Wrong. Measurements of home price declines can be skewed depending on which homes in which markets are being measured. For instance, the Case-Shiller Index, which indicates that home prices are down 20%, is heavily skewed towards homes with subprime loans and other distressed home sales. These troubled homes have experienced a steeper decline than home prices in general, says Yun, adding that both government data based on loans backed by Fannie Mae and Freddie Mac and data from the National Association of Realtors suggest much more modest price declines. TIP: If you’re selling your home, the best thing to do is price your home right.

2. The much smaller number of new homes now under construction indicates the dismal outlook for the housing market. Wrong. The inventory of homes on the market is very high, so the last thing we need now is more new homes being built. Home builders have cut back sharply on production, which will help lower inventories and stabilize prices. The builders have done exactly what market forces are dictating under current conditions, Yun says. TIP: With many new homes completed but not sold, you can find great opportunities.

3. Even when the housing market recovers, home price growth will be only 4 to 6% per year — much less than historical average returns for the stock market. Most buyers put less than 20% of their own money into a home purchase; this borrowing power can translate to a greater rate of return. This is how Yun explains it: Home price appreciation historically has been about 1 to 2 percentage points higher than consumer price inflation, which translates into about 4 to 6% per year. But this growth rate cannot be viewed as a rate of return like the stock market. The reason is that most people do not buy a home for all cash, instead making a cash down payment and borrowing the rest. The leverage this borrowing creates can magnify returns — and losses. If price growth returns to historic norm, the price growth of 4% can easily turn into 20 to 30% rate of return if the home buyer makes a down payment of 10 or 20%. TIP: Get the fundamentals right when investing in real estate.

4. Impending baby boomer retirements and moves to small homes will cause a glut of homes on the market. Wrong. The first edge of the baby boomers has reached 60 years of age and the massive bulk of that generation will soon go into retirement, but far from trading down, many of these older homeowners are keeping their homes or moving to ones of comparable size. And even if more boomers do sell their larger homes in the years ahead, Yun points out, the rapidly growing U.S. population should absorb the inventory of existing homes on the market. TIP: Active seniors can find a retirement community that caters to their needs and interests.

5. The federal government takeover of secondary mortgage companies Fannie Mae and Freddie Mac is a bailout that will cost taxpayers bundles. Too soon to tell, says Yun. It’s conceivable that taxpayers may have to cover some losses. It’s also possible that the government takeover will result in no loss of taxpayer dollars. Even if taxpayer funds are used, the bailout would be preferable to the global economic problems that would have occurred if Fannie and Freddie had gone belly up. TIP: Uncle Sam is “bailing out” homeowners facing foreclosure. Find out more about the Hope for Homeowners plan.

6. The Federal Reserve controls mortgage rates. Wrong. Yun explains: The Fed’s activities influence mortgage rates but don’t directly control them. What the Fed sets is a very short-term interest rate called the Federal Funds Rate. Mortgage rates are determined by global savings as well as credit spreads and inflationary pressures. Over the past two years, the Fed has raised the Fed Funds Rate to 5.5%, and then cut it deeply to around 2%. All the while, the 30-year mortgage rate has averaged in the 6 to 6.5% range. TIP: Today’s rates don’t look bad compared to the 10% we saw in the early ’90s and 17% in the ’80s.

7. It’s the wrong time to buy. Wrong. All real estate is local. For those who are financially and mentally ready to buy, there has never been a better time to be a buyer in many markets. An abundant selection of homes and historically low interest rates give buyers an edge over sellers. The recently passed $7,500 federal tax credit for first-time home buyers creates an added incentive. For someone with a long-time horizon, Yun says, there is very little worry about home values since homes have historically provided a solid foundation for wealth accumulation. TIP: Compare the pros and cons of renting vs. buying to see what makes sense for you.

8. It’s the right time for everyone to buy. No. All real estate is local, and everyone is unique. Someone who is not emotionally or financially ready should not be forced or induced to join the rank of homeowners, even when a market presents good buying opportunities. Potential homeowners clearly need to understand that the decision to move up to ownership requires sacrifices, like saving up for down payment and elevating their credit scores. Homeowners who lose their home to foreclosure serve no one’s interest, Yun adds. TIP: Take a good hard look at your financial status and create a homeowner’s budget to see if you’re ready to buy a home.

9. It’s a terrible time to sell. Wrong. In markets where home sales are picking up strongly, a seller can easily get an offer if the property is priced correctly. Also, Yun says, for those looking to trade-up, selling low on an existing home is more than offset by buying the new move-up home at a lower price. When the market recovers, home price appreciation on the traded-up home will bring bigger bang for the buck. TIP: Homebuyers want bargains in this market. If you price your home much lower than your competition, you might end up with a bidding war.

10. With the advent of the Internet, more and more homes are being sold by owners (FSBOs), and real estate practitioners are becoming obsolete. Nope. According to Yun, the share of home sellers who choose to go it alone when selling their home has actually decreased from about 20% in the late 1980s to about 12% today. Even after these sellers successfully complete a transaction, only 4 in 10 say they would sell their next home without the assistance of a real estate professional. TIP: You don’t have to sign a listing contract to talk to a Realtor. Ask family and friends for referrals and interview a few. You might even get some free advice.

Source: http://rismedia.com/wp/2008-10-28/for-your-clients-10-real-estate-myths-debunked/

 

If you would like to buy or sell Wilmington, NC real estate, contact Sandy and Steve Thornton for all your home buying and selling needs. Specializing in Wilmington, Leland, Hampstead, Sneads Ferry, Jacksonville, Topsail Island including Surf City, Topsail Beach, North Topsail Beach, Beach and waterfront properties covering New Hanover County, Pender County, Brunswick County and Onslow County areas.

 

New-home sales rose 2.7% from August to a seasonally adjusted annual rate of 464,000 homes. Economists had expected sales would drop from the August level.

The median price of a new home sold in September declined by 9.1% from a year ago to $218,400 -- the lowest level since September 2004, when the five-year housing boom was accelerating.

Despite the gain from August, the sales rate was still down 33.1% from a year ago.

Regionally last month, new-home sales were up 22.7% in the West, down 21.4% in the Northeast, down 5.8% in the Midwest and up 0.7% in the South.

The gain mirrors a report last week that the sales of existing homes rose in September by 5.5%, the largest monthly gain in more than five years. The report jumped as lenders aggressively cut prices on homes acquired in foreclosures.

By Charley Blaine and Elizabeth Strott

 

If you would like to buy or sell Wilmington, NC real estate, contact Sandy and Steve Thornton for all your home buying and selling needs. Specializing in Wilmington, Leland, Hampstead, Sneads Ferry, Jacksonville, Topsail Island including Surf City, Topsail Beach, North Topsail Beach, Beach and waterfront properties covering New Hanover County, Pender County, Brunswick County and Onslow County areas.

RISMEDIA, Oct. 14, 2008-Now is a time to face facts. In the past four months, research suggests that housing inventory has climbed to an 11-month-plus supply.

According to NAR, in fact, there was an 11.1-month supply of homes in June 2008.

As an industry, we need to come together to focus on the best strategies for getting this inventory sold. Putting new tools into the hands of home buyers-including the recently enacted housing stimulus package-is certainly expected to spark an uptick in the months ahead, but in the meantime, it is our responsibility to encourage sellers and agents to price properties correctly in order to start moving this abundance of inventory off the market. NAR has several consumer-focused tools available at www.REALTOR.org to help the cause, including publications like “It’s a Great Time to Buy, Getting it Sold,” and “Pricing Your Home to Sell,” and helpful toolkits, such as, “Tips for Pricing Your Home.”

In this month’s Power Broker Roundtable, panelists tell us why it’s so important to work with sellers to price properties correctly, and how this effort is critical to reducing housing inventory.

Moderator: Alex Perriello, Special Liaison for Large Firm Relations, NAR
Participants: C. Dan Joyner, Broker/Owner, Prudential C. Dan Joyner REALTORS®, Greenville, South Carolina
Robert Weber, President, First Weber Group, Greater Wisconsin
Pat Riley, President and COO, Allen Tate Companies, Charlotte, North Carolina

Alex Perriello: Bob, how important is the right listing price in your market?

Bob Weber: Well, according to the MLS in Central Wisconsin, unit sales were down 25% from July ‘07 to July ‘08, but the average selling price was down only 2%-so we haven’t had to face some of the huge price declines that other regions have faced.

Our agents put great stock in doing a detailed market analysis for each seller and showing them true comparisons. We take a four-stage approach when it comes to taking a listing: we show up, we listen, we tell them the truth-and if they can’t live with our suggested list price, we walk away.

Pat Riley: We understand that selling your home is an emotional decision. Some will say, “My neighbor got X amount a year ago, and my home is so much nicer than theirs.” They are not realistic about competing homes in their region. So we just put our sellers in the car and take them around personally to see the competition for themselves.

Dan Joyner: We all know that thorough market analysis and neighborhood price comparisons are the only way to set the right listing price-especially as the market keeps shifting. In fact, the last two months have been very encouraging. If a home is reasonably priced and market-ready, we are beginning to witness multiple offers within the first few days of the listing-but the right listing price is essential.

BW: Absolutely. The fact is, there hasn’t been a better time in years to buy that first home-or a second or vacation home for that matter. More and more buyers are beginning to realize that, and I think sellers are realizing it as well. They understand they have to be realistic to take advantage of what’s happening today.

PR: There’s another issue we point out to our sellers-the nature of the swing. That is, any dollars they may give up on the sale of their home, they will likely make up on what they buy. It’s a moot point, so pricing the property right in the first place is a win-win situation.

AP: So as sellers in general become more realistic, sales will continue to improve?

DJ: Yes, and as that happens, and the good buys are being snapped up, the number of homes on the market will decrease. That is precisely the situation we need in order to get back on track.

BW: Which brings us back to point one. Our agents know we need to walk away from listings where the seller has no urgency to sell, because those are the homes that will simply clutter up the marketplace.

PR: We also need to focus our energy on buyers-because we know there are plenty of them out there, wanting to buy and buy now. The sooner we can help our sellers to realize that, the sooner the market will return to more normal levels.

The Power Broker Roundtable is brought to you by the National Association of REALTORS® and Alex Perriello, NAR’s Special Liaison for Large Firm Relations. Watch for this column each month, where we address broker issues, concerns and milestones.

If you would like to buy or sell Wilmington, NC real estate, contact Sandy and Steve Thornton for all your home buying and selling needs. Specializing in Wilmington, Leland, Hampstead, Sneads Ferry, Jacksonville, Topsail Island including Surf City, Topsail Beach, North Topsail Beach, Beach and waterfront properties covering New Hanover County, Pender County, Brunswick County and Onslow County areas.

First-Time Homebuyer Federal Tax Credit

As part of the “Housing and Economic Recovery Act of 2008” that was recently signed into law, Congress has created a new, temporary federal income tax credit to provide an incentive for first-time homebuyers. This is great good news for first-time homebuyers and anyone how hasn't owned a home in 3 years.

The highlights of this federal tax credit are as follows:

• The amount of the federal tax credit is for 10% of the cost of the home, up to a maximum credit of $7,500. In essence, this is an interest-free loan that enables consumers to receive a tax credit on a dollar-for-dollar basis on their personal income tax return in the calendar year following the year of closing on their home. They begin paying the tax credit back the year after that and make equal installments during the next 15 years. If the homeowner sells the home at any point during the 15-year payback period, then the remaining amount is recaptured, unless they sell the home at a loss, at which point the balance is forgiven.
  
  e.g., If a home costs $65,000, the allowable credit would be $6,500. If a home costs $120,000, then the allowable credit would be $7,500.
  
• Eligibility is for first-time homebuyers only. In this case, a first-time homebuyer is defined as an individual who has not owned a primary home at any time during the past three years, but who may have done so previously. Although certain income limits do apply, the amount of the credit is the same for all taxpayers, married or single.
  
• Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income.
•  
• Individuals with incomes between $75,001 and $94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit.
  
• Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.
  
• The federal income credit can be claimed on one’s individual or joint tax return for the purchase of any single-family home between April 9, 2008 through July 1, 2009. Individuals should consult a professional tax advisor for exact tax calculations.
  
  e.g., If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability.
  
  e.g., If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.
  
• This tax credit is required to be repaid without interest in equal installments of 6.67% of the total credit each year for 15 years beginning the year after the tax credit is claimed.
  
  e.g., If a homebuyer claims the $7,500 credit in 2009 on their federal income tax return for a closing that occurred in 2008, then the credit is received in 2009, so repayment begins in 2010 with an annual repayment amount of approximately $500 a year.

Keep in mind that this tax credit is retroactive to first-time buyers who either closed on or after April 9, 2008 or are currently under contract to close in the near future.

 

If you would like to buy or sell Wilmington, NC real estate, contact Sandy and Steve Thornton for all your home buying and selling needs.

 Specializing in Wilmington, Leland, Hampstead, Sneads Ferry, Jacksonville, Topsail Island including Surf City, Topsail Beach, North Topsail Beach, Beach and waterfront properties covering New Hanover County, Pender County, Brunswick County and Onslow County areas

By Key Yessaad -
1. Bailout may not be the right term – yes we hear the term all over the news and the plan will help banks shed their “toxic assets” to calibrate their Balance Sheet. An interesting term would be “Government Bridge-Loan.” – it conveys the idea that the money is used to buy assets that will be cleaned up and later sold… Many of you understand this concept when you buy a distressed property, fix it up, and then either sell or rent it.


2. Think long term – don’t get swayed by the gyrations in the Stock Market: Banks survive by making loans – especially short term loans between banks… these types of loans have come to a grinding halt because banks make loans based on assets (Balance Sheet.) Some of the assets that banks are holding are Mortgage-Backed Securities and no one on Wall Street wants them as collateral. You see these Securities are bundles of mortgages that need to be assessed; some are good some are bad, some are so-so… think in terms of a bushel of apples with a few rotten ones; you have to remove the bad apples to save the rest. The $700 Billion ‘‘Emergency Economic Stabilization Act of 2008’’ aims to do that.



3. Think patience and Asset Stabilization: Underneath each of these Mortgage-Backed Securities are properties and each one has a value. The current mortgage on some properties maybe higher than the market value of the property – but it is unlikely that a large number of them are in the same predicament. In a sense this is a Bridge Loan guaranteed and operated by the Treasury to create stability in the financial system.



4. Think respite – not free money: The $700 Billion is a loan by us the Taxpayers to the Treasury to buy assets no one wants, stabilize them, then sell them at the appropriate time. (Again think Bridge Loan!) Many hate the idea of the government interfering in the Capital Markets on a philosophical basis; but that ship has sailed. If more banks fail and liquidity to corporations is not restored, more business failures will occur and more jobs will be lost. The grim predictions you have heard are real…



5. Think liquidity between banks & eventually the consumer: Without liquidity in the financial system corporations will not get the capital necessary to build factories; which are the engine of employment in our nation. The spirit of entrepreneurship will grind to a halt… The essential ingredient in Capitalism is Capital; and it is in very short supply.



6. What is the Stock Market doing? The financial markets are trying to find a bottom… In a sense there are many institutions for which it is too late… Washington Mutual, Wachovia, Lehman Brothers, AIG, etc… The market is trying to figure out who will be the survivors and who is too wounded to survive (it’s a bit gloomy but that’s how the market works.) Wachovia used to be one of the most conservative banks, but in the Mortgage Frenzy of 2004/2005 they felt they were behind the times and wanted to enter the SIV’s market – they did so by acquiring Golden West Financial (practically the inventors of the pay-option mortgage… think about that for a second. A mortgage designed to be paid at the calling to the mortgagee; a mortgage that increases principal versus reducing… talk about a craze in the mortgage business.)
The gyrations in the market are designed to weed out the companies that are too weak to survive. The tough part is the employees of those companies are going to lose their jobs; the deposit accounts are safe.



7. Why is term “Toxic” used so often in this crisis? Mortgage-Backed Securities are bundles of mortgages bought and sold on the Open Market; we are in a period when no one knows what they are constituted of. This lack of pricing ability makes investors stay away from them. Remember Capitalism 101: You have to price something before you can sell it.

 

If you would like to buy or sell Wilmington, NC real estate, contact Sandy and Steve Thornton for all your home buying and selling needs.

 Specializing in Wilmington, Leland, Hampstead, Sneads Ferry, Jacksonville, Topsail Island including Surf City, Topsail Beach, North Topsail Beach, Beach and waterfront properties covering New Hanover County, Pender County, Brunswick County and Onslow County areas