Home sales have been softer than analysts have predicted, and it’s really no surprise.
Prices aren’t really that attractive, even with all the home price declines; affordability is only historically high because mortgage rates are at record low levels.
That’s one reason I don’t see mortgage rates rising anytime soon; wouldn’t want to dampen affordability, especially if nobody is buying to begin with.
Then there’s the fact that prospective buyers don’t have any money, as evidenced by a poll of both current home owners and renters, conducted for the National Association of Home Builders (NAHB).
About one-third of renters who responded intend to buy a home in the “near future,” but 39 percent said they don’t have the money to buy right now. Uh oh.
Another 20 percent said they don’t think they can qualify for a mortgage, and 18 percent said job security is the greatest concern.
Oh, and 29 percent of current homeowners interested in buying a new home say their inability to sell their current home is the biggest obstacle.
There’s also the worry that the value of a new home might fall after the purchase is made, and many believe home prices are still just too high, even with that homebuyer tax credit set to expire in a couple months.
I for one, agree. That’s why I said there’s no rush to buy a home, still too much downside risk in my opinion.
This post was written on March 2, 2010
I follow the real estate market pretty intently, and I’ve actually considered purchasing some real estate myself, given the fact that bargains are beginning to emerge.
But at the same time, I don’t think there is any rush whatsoever to purchase a property. I don’t think you’ll miss anything if you wait.
Sure, home prices have fallen significantly throughout the nation, and mortgage rates are at record lows. That’s all good news, but that still doesn’t mean it’s the right time to buy.
There’s also that homebuyer tax credit floating around, along with the move-up buyer tax credit, both of which are good until April 30, 2010.
Of course, it can be argued that the tax credit is artificially propping up home prices, so that’s essentially awash, if you follow that logic.
And the threat of mortgage rates rising is also less of a concern in my eyes because one of the main reasons home prices are so affordable right now is due to the ultra low rates.
Do you think the government would risk messing that up, given how fragile things are right now?
If they did somehow rise, home prices would probably fall to compensate, so again, no rush.
At the same time, the mainstream media will make it seem as if you need to buy now, before it’s too late; that there are once in a lifetime opportunities standing before you.
Just don’t forget about all that shadow inventory, or the fact that roughly a quarter of all residential properties with mortgages were in a negative equity position as of year-end.
If you do decide to buy right now, you may wonder when home prices will rise? Some think they won’t hit recent peak levels until 2020…
In other words, don’t expect that instant profit we all grew accustom to in the 00’s, when it seemed anything you purchased appreciated within months.
If you are interested in buying a home, consider taking a look at the most overvalued cities and the most undervalued cities in the nation.
Or perhaps the top investment property markets in the United States, because regardless of all the turmoil, real estate is still a good investment. Just make sure you time it right…
This post was written on February 24, 2010
I already touched upon the most overvalued cities in the United States, so let’s talk about undervalued areas. Those are the ones we might want to invest in, right?
As one may have guessed, the hard-hit, foreclosure-riddled Las Vegas metro is the most undervalued area in the United States, with a median home price of $129,700.
According to statistics compiled by National City and IHS Global Insight, homes are selling at 41.40% below fair market value, compared to 38% below market value in 2006.
In Las Vegas, a number of homes and condos that were selling for $200,000 are now listed at around $40,000, presenting potential opportunity for those brave enough to take a gamble on Sin City.
Other undervalued spots include hard-hit spots in Florida, along with much of Central California, where foreclosures run rampant; Warren, Michigan also made the top ten, as the economy up there has ground to a halt.
The numbers are determined by comparing median home prices, income, mortgage rates, and population densities, along with historical premiums or discounts exhibited in areas over time.
The big question is determining which one of these undervalued spots can turn it around the fastest, an answer most likely based on employment conditions in the associated city.
This post was written on February 2, 2010
Plenty has changed over the past four years in the real estate world.
Home prices have plummeted, large banks and mortgage lenders have gone out of business, and millions have received foreclosure notices.
But as the dust begins to settle, opportunities will present themselves, and as I always say, real estate is local, so some areas will recover faster than others.
Back in 2006, 213 of 299 metro areas were considered overpriced, according to a survey conducted by National City Corp. and IHS Global Insight, and reported by CNN.
Today, just 87 markets are considered overvalued, thanks to massive price declines nationwide.
Some markets have become less overvalued, such as Atlantic City, which was 59% overvalued in 2006, and now only 30.2% over market price.
Conversely, Wenatchee, Washington was 13% overvalued in 2006, and now 28.9% above its fair market value.
Here are the top ten most overvalued cities in the United States at the moment:
Take a look at the complete list here to see where your area stands. This information could be helpful in making a decision to buy, sell, or invest (Is real estate still a good investment?).
This post was written on January 28, 2010
If you’re in the market for an investment property, you may be wondering where to buy in 2010.
Well, a company that specializes in analyzing the “best” investment properties could make your search a little bit easier.
FinestExpert.com gathers and analyzes data from over four million active properties nationwide, looking at things like employment, cash flow, rental markets, foreclosure impact, and growth level to find the top real estate investment markets.
The metropolitan areas that made the list tend to have the largest number of properties currently selling below their estimated value, with a good proportion of cash flow positive properties.
“For the first-time homebuyer, a good cash flow deal represents the ability to own for less than it would cost to rent,” the company said.
“These make excellent starter properties, especially for someone who may want to one day become a real estate investor.”
It’s important to note that the markets listed below were identified by the company as good “buy-and-hold” properties, not “quick-fix-and-flip” investments.
On to the list:
1.Dallas-Forth Worth-Arlington, TX
2.Houston, TX
3.Tulsa, OK
4.San Antonio, TX
5.Salt Lake City, UT
6.Phoenix, AZ
7.Indianapolis-Carmel, IN
8.Denver-Aurora, CO
9.Oklahoma City, OK
10.Charlotte-Gastonia-Concord, NC-SC
This post was written on January 13, 2010
Buying a home isn’t easy. There are a number of things that can and will go wrong, from the financing falling through, to the appraisal coming in low, to seeing your offer on that dream house get trumped by another buyer.
Adding to the difficult and sometimes competitive process is timing the transaction. Is now the right time to buy? Are home prices still falling? When will they rise?
While it’s nearly impossible to time your home purchase perfectly, there are a few things you can do to minimize your downside risk.
One tip I’d like to highlight has to do with functional obsolescence, which is essentially home price depreciation caused by a loss of building utility.
Specifically, if the property you purchase doesn’t look like the others around it, if may suffer in value.
You’ve probably seen a street in your neighborhood or somewhere nearby where one home stands out above the rest.
Perhaps it has been completely remodeled, or has features that aren’t the norm for the area; stuff like ornate marble pillars and/or a huge iron gate surrounding the property that make it look like the Taj Mahal.
Whatever it is, the home doesn’t look like the others, even though it may be much more aesthetically pleasing and seemingly more expensive.
These characteristics are known as over-improvements, because they’re too lavish for the surrounding area.
As a result, the property value will be dragged down by those nearby, because you’re only as strong as those around you.
Conversely, if you buy a property that isn’t as picture perfect as those close by, but the amenities are fairly similar, you should see a value boost as a result.
So keep that in mind if you’re thinking of buying a property or remodeling your current home (see best and worst home improvements).
This post was written on December 8, 2009
Real Estate Q&A: “Who qualifies as a first time home buyer?”
With all the fuss about the first-time home buyer tax credit, you’re probably wondering if you’re eligible.
Well, the tax credit can only be used towards the purchase of a primary residence, meaning a home you actually intend to live in full time, no vacation homes or investment properties.
Additionally, you (and your spouse if applicable) must not have owned a principal residence in the three years prior to purchase to qualify.
If you meet these requirements, you can take advantage of the first-time home buyer tax credit, which just got extended from November 30 to April 30, 2010.
The tax credit can be as high as $8,000, but may not exceed 10 percent of the purchase price of the property.
You’re entitled to receive the full tax credit if you’re income is $125,000 or less for single tax filers, and $225,000 for joint tax filers.
That’s up from $75,000 and $150,000, respectively; the extension of the tax credit has also been accompanied with a “move-up tax credit,” so even if you don’t qualify as a first-time home buyer, you can take advantage.
To qualify for the move-up tax credit, you need to have used your current property as a primary residence for five of the past eight years.
Of course, the move-up credit seems like a bit of a waste, because who in their right mind would sell right now with prices in the dumps and buy a new property given the tight lending environment and uncertainty?
Seems like a bit of a stretch by the interested parties (real estate agents, home builders, etc.).
This post was written on November 16, 2009
If you want a good idea as to what your home might sell for, or what one may cost, you need to go local; forget about national home prices.
Who cares if home prices are falling in Denver if they’re rising in Boston, and vice versa? What about home prices sold in my neighborhood?
If you look at home prices sold in and around your area, and you’ll get a much better representation of what to expect if you decide to jump into the housing market.
That’s step one; step two is getting the latest sales information, because home prices can and will change rapidly, and appraisals are based largely on recent comparable sales.
Last week, real estate information provider Redfin announced that it can now deliver 1.4 million near-real-time sales records.
“Comparative Market Analyses are one of the real estate industry’s ‘killer applications,’” said Michael Smedberg, leader of Redfin’s query & statistics team, in a press release.
“But they’re often shrouded in mystery; agents have direct access to data such as prices and photos for just-sold homes, but buyers rarely do.”
“Without that direct access, consumers have had to rely on the expertise and availability of their agent, and this in turn made it hard to figure out on their own what to offer or ask for a listing.”
Previously, consumers could only access data based on public records that Redfin claims is delayed between two to eight weeks, at which time home prices could change by as much as 5%.
Going forward, you can access sales information via MLS-powered records within 15 minutes of a property being taken off the market by clicking on the “recently sold” tab in neighborhood, city, and region views on Redfin.
So if you’re in the market to buy or sell a home, you may want to keep an eye on this handy tool. It could help you make an offer for a home, set the right listing price, or gauge when home prices will rise in your neighborhood.
This post was written on November 10, 2009
There’s been a ton of talk about home price declines over the past couple years, but now a bit of optimism is starting to shine through, at least in select markets.
So, when will home prices rise, and why? SmartMoney.com wrote a post on signs to look for that should increase the value of your home.
It’s not easy to time the market, but looking out for these positive signs could help you buy (or sell) at a better time.
Fewer Foreclosures
When foreclosure filings and related sales dip, there will be less of a drag on home prices in a given area.
Foreclosures have fallen from their record highs, but that’s only after a heap of government intervention and taxpayer dollars, so we won’t know if things have really improved for a while.
Falling Inventory
When housing inventory falls, home prices will rise; it’s basic supply and demand.
One of the major problems tied to the current housing bust was an excessive supply of new homes, and demand just couldn’t keep up.
That’s why you’ll see entire neighborhoods in fringe areas around the country that now look like foreclosure ghost towns.
List-to-Sale Price Ratios
When the listing price of a home and the selling price are more aligned, it’s a good sign that home prices are rising in the area.
Nationally, homes are currently selling at a 5-10% discount below their asking price; keep an eye on this metric and you may be able to get a head start over other buyers.
Lower Unemployment
Unemployment (and underemployment) has been on the rise for some time now, and with that comes an inability to pay the mortgage.
It also means fewer buyers in the housing market, deflating home values in the process.
Income Levels
Conversely, when income levels rise, home prices rise.
If the median household income of a certain neighborhood rises, there’s a good chance home prices will move higher as well.
More borrowers will be able to make mortgage payments and maintain and/or even improve their homes, lifting area home prices.
This post was written on November 2, 2009
Home buying Q&A: “Can you purchase a home with no money down?”
It wasn’t long ago that you could purchase a home with nothing down, and even get assistance with the closing costs!
Back in 2006, 100% financing was the norm and you were a fool to put anything down; heck, there was even a mortgage lender named “Zero Down Mortgage.”
But these days have come and gone, leaving scores of foreclosures in their wake, making lenders think twice about lending so loosely in the future.
Nowadays, the only place you’ll be able to find 100% financing will be via government programs offered from the USDA or the VA.
Of course, these loan programs aren’t available to everyone, so in reality, you’re probably going to have to put some money down if you want that new home (how much should I put down on my home?).
Fortunately (or unfortunately depending on your viewpoint), prospective homebuyers are still able to put down as little as 3.5% to purchase a property via an FHA loan.
Government-owned Freddie Mac also offers its Home Possible® 97 Mortgage, which requires as little as 3% for down payment (loan to value ratio).
Some credit unions will allow you to purchase a home with as little as 5% down, while the larger banks and mortgage lenders want 10% these days.
Perhaps the best way to see all your options with regard to down payment is by getting in touch with a broker, who can shop your loan scenario with various lenders and explore their numerous programs.
Tip: Make sure you’ve got seasoned asset reserves in the bank to cover several months of mortgage payments and closing costs.
This post was written on October 22, 2009