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5 Real Estate Headlines You’ll see in the Next Six Months

This is great insight from our friends at KCMBlog.com:

 

Making predictions can be the ‘kiss-of-death’ for a blog. Even if we get four out of five correct (80%), there are those in the industry who will kill us on the one we got wrong. We believe strongly that when making a real estate decision for you and your family you must look forward and take into consideration how the housing market may change.

For this reason, we are willing to take on the possible wrath of our counterparts by sticking out our necks and predicting these will be the major real estate news stories from now until the end of the year.

Interest Rates Rise

Many, including us, have been surprised that rates have not risen already. However, the next several months are going to see three distinct changes that will propel rates upward.

  1. As the government starts to leave the mortgage market, private industry will step in. Private industry demands a higher rate of return on their investments. Mortgages will be no different. Studies have shown that 30 year mortgage rates could increase by 1 to 3% over the current rate.
  2. In many higher priced markets, rolling back Conforming Loan Limits means that rates for the mortgages on these properties will resort back to the rates on private jumbo loans. The FHFA informed us that last year, the difference between mortgage rates for jumbo loans and jumbo-conforming mortgages has varied between about ½ and ¾ of a percentage point.
  3. As the economy gets better (and we believe it will), the pressure to keep rates low to stimulate growth will abate.

Some Loan Requirements Tighten but More Can Now Get a Loan

Lending institutions have already started to introduce stricter mortgage guidelines. Whether the Quality Residential Mortgage (QRM) requirements are instituted as originally proposed or eased somewhat, there is no doubt that guidelines will continue to tighten as we work through the year. However, we believe the private sector will again start introducing alternative mortgage financing but at a greater expense to the consumer. You WILL be able to get a mortgage. It will just cost you more.

Housing Sales Increase

Contracted sales have shown consistent improvement over the last six months and we feel this will continue and actually begin gaining even greater momentum. We believe there is a ‘pent-up’ buying demand caused by the volatility of the market over the last several years. When interest rates start to move upward and alternative financing becomes more available, these buyers will start to jump off the fence. We believe there will be a major upswing in sales over the next six months.

Distressed Properties Increase Markedly

More people are paying their mortgage on time and that is great news for housing in the long term. However, the numbers of distressed properties currently in the foreclosure process is still very swollen. These properties will begin coming to the market in the second half of the year as short sales and foreclosures. The numbers will be staggering in some areas.

Prices Continue to Soften in Most Markets

The current housing inventory for sale and the distressed properties about to come on the market will vastly outnumber the increased supply of purchasers we will see over the next six months. There will be more houses for sale then there will be buyers purchasing them. That oversupply will continue to put downward pressure on prices through the rest of this year and into 2012.

You now know what we believe will take place in real estate between now and the end of the year.

 

5 Real Estate Headlines You’ll see in the Next Six Months

This is great insight from our friends at KCMBlog.com:

 

Making predictions can be the ‘kiss-of-death’ for a blog. Even if we get four out of five correct (80%), there are those in the industry who will kill us on the one we got wrong. We believe strongly that when making a real estate decision for you and your family you must look forward and take into consideration how the housing market may change.

For this reason, we are willing to take on the possible wrath of our counterparts by sticking out our necks and predicting these will be the major real estate news stories from now until the end of the year.

Interest Rates Rise

Many, including us, have been surprised that rates have not risen already. However, the next several months are going to see three distinct changes that will propel rates upward.

  1. As the government starts to leave the mortgage market, private industry will step in. Private industry demands a higher rate of return on their investments. Mortgages will be no different. Studies have shown that 30 year mortgage rates could increase by 1 to 3% over the current rate.
  2. In many higher priced markets, rolling back Conforming Loan Limits means that rates for the mortgages on these properties will resort back to the rates on private jumbo loans. The FHFA informed us that last year, the difference between mortgage rates for jumbo loans and jumbo-conforming mortgages has varied between about ½ and ¾ of a percentage point.
  3. As the economy gets better (and we believe it will), the pressure to keep rates low to stimulate growth will abate.

Some Loan Requirements Tighten but More Can Now Get a Loan

Lending institutions have already started to introduce stricter mortgage guidelines. Whether the Quality Residential Mortgage (QRM) requirements are instituted as originally proposed or eased somewhat, there is no doubt that guidelines will continue to tighten as we work through the year. However, we believe the private sector will again start introducing alternative mortgage financing but at a greater expense to the consumer. You WILL be able to get a mortgage. It will just cost you more.

Housing Sales Increase

Contracted sales have shown consistent improvement over the last six months and we feel this will continue and actually begin gaining even greater momentum. We believe there is a ‘pent-up’ buying demand caused by the volatility of the market over the last several years. When interest rates start to move upward and alternative financing becomes more available, these buyers will start to jump off the fence. We believe there will be a major upswing in sales over the next six months.

Distressed Properties Increase Markedly

More people are paying their mortgage on time and that is great news for housing in the long term. However, the numbers of distressed properties currently in the foreclosure process is still very swollen. These properties will begin coming to the market in the second half of the year as short sales and foreclosures. The numbers will be staggering in some areas.

Prices Continue to Soften in Most Markets

The current housing inventory for sale and the distressed properties about to come on the market will vastly outnumber the increased supply of purchasers we will see over the next six months. There will be more houses for sale then there will be buyers purchasing them. That oversupply will continue to put downward pressure on prices through the rest of this year and into 2012.

You now know what we believe will take place in real estate between now and the end of the year.

 

Pending Home Sales Rebound, Mortgage Rates Remain Low

Pending home sales rose sharply in May with all regions experiencing gains from a year ago, a signal that the housing market could improve through the second half of the year, the National Association of Realtors said Wednesday.

Pending sales, a forward-looking indicator based on contract signings, jumped 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April, according to NAR. That is 13.4 percent higher than the 78.3 reading in May 2010.

“Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” said Lawrence Yun, NAR chief economist.

“Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago,” he said.

Those markets include Hartford, Conn.; Indianapolis; Minneapolis; Houston and Seattle.

Pending sales in the Northeast were up 7.3 percent, 4.4 percent above a year ago. The Midwest the index jumped 10.5 percent, 17.2 percent higher than May of last year.

In the South, pending home sales increased 4.1 percent, 14.6 percent higher than a year ago. In the West the index surged 12.9 percent, 13.5 percent above May 2010.

The data reflects contracts but not closings, which normally occur with a time lag of one to two months.

This is the first time since April 2010 that contract activity was above prior year levels, and the monthly gain was the strongest increase since last November, when the index rose 10.6 percent.

“Home sales still could be 15 to 20 percent higher,” Yun said. “If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”

Mortgage rates are in line to spur buying.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46 percent from 4.57 percent,  the lowest 30-year rate recorded in the survey since the middle of November, the Mortgage Bankers Association said in its weekly Wednesday report.

A 15-year fixed-rate mortgage decreased to 3.64 percent from 3.70 percent, the lowest 15-year rate recorded in the survey since the beginning of November.

Meanwhile, mortgage applications decreased 2.7 percent from a week earlier, even as home loan rates dropped to their lowest levels in nearly eight months.

The Refinance Index decreased 2.6 percent while the seasonally adjusted Purchase Index decreased 3.0 percent in the week that ended June 24, according to data from the Mortgage Bankers Association.

Overall, the four-week moving average is up 0.7 percent, with refinancings showing a 1.5 percent increase, while purchases are down 1.5 percent.

The refinance share of mortgage activity increased to 69.5 percent of total applications from 69.2 percent the previous week.

Originally posted on thehill.com

Home Prices Up, First Time in 8 Months

Data through April 2011, released yesterday by S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show a monthly increase in prices for the 10- and 20-City Composites for the first time in eight months. The 10- and 20-City Composites were up 0.8% and 0.7%, respectively, in April versus March.

In April 2011, the 10-City and 20-City Composites recorded annual returns of -3.1% and -4.0%, respectively. On a month-over-month basis, the 10- and 20-City Composites were up 0.8% and 0.7% in April versus March.

“In a welcome shift from recent months, this month is better than last – April’s numbers beat March,” saysDavid M. Blitzer, Chairman of the Index Committee at S&P Indices. “However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the Spring-Summer home buying season. It is much too early to tell if this is a turning point or simply due to some warmer weather.

As of April 2011, average home prices across the United States are back to the levels where they were in the summer of 2003. Measured from their peaks in June/July 2006 through April 2011, the peak-to-current declines for the 10-City Composite and 20-City Composite are -32.6% and -32.8%, respectively. From their April 2009 troughs, the 10-City Composite has risen 1.4% and the 20-City Composite is up a scant 0.7%.

The table below summarizes the results for April 2011. The S&P/Case-Shiller Home Price Indices are revised for the 24 prior months, based on the receipt of additional source data. More than 24 years of history for these data series is available, and can be accessed in full by going to www.homeprice.standardandpoors.com

 

April 2011 April/March March/ February
Metropolitan Area Level Change (%) Change (%) 1-Year Change (%)
Atlanta 101.95 1.6% -0.3% -3.5%
Boston 147.07 -0.2% -1.7% -4.2%
Charlotte 108.42 -0.3% -1.2% -6.6%
Chicago 110.12 -0.4% -2.4% -8.6%
Cleveland 97.69 1.2% -1.8% -6.8%
Dallas 113.38 0.5% -0.8% -4.0%
Denver 122.32 1.5% -0.6% -4.1%
Detroit 62.74 -2.9% -4.4% -7.5%
Las Vegas 96.47 -0.7% -1.1% -6.2%
Los Angeles 168.20 0.3% -0.3% -2.1%
Miami 136.99 -0.2% -0.8% -5.6%
Minneapolis 106.07 0.4% -3.7% -11.1%
New York 164.17 0.8% -1.0% -2.8%
Phoenix 100.36 0.1% -0.5% -8.8%
Portland 132.84 0.1% -0.7% -9.2%
San Diego 154.50 0.4% -0.8% -4.3%
San Francisco 132.03 1.7% -0.1% -5.5%
Seattle 135.14 1.6% 0.1% -6.9%
Tampa 126.47 -0.4% -0.5% -7.7%
Washington 186.76 3.0% 0.2% 4.0%
Composite-10 152.51 0.8% -0.8% -3.1%
Composite-20 138.84 0.7% -0.9% -4.0%
Source: Standard & Poor’s and Fiserv
Data through April 2011

 

Read the full report at HousingViews.com.

 

 


 

 

 

 

House Prices Through 2015

Everyone seems to have an opinion on where home prices are headed. Housing bulls are saying prices may start rebounding as early as later this year. Some housing bears are saying that prices may still drop another 10-15%. What actually is going to happen? No one knows for sure.

However, Macro Markets, a financial technology company, actually surveyed 108 economists, real estate experts, and investment and market strategists for their June 2011 Home Price Expectations Survey. They then averaged all 108 opinions. Here is what the report says about house prices over the next five years:

  • 2011: prices will depreciate 3.52%
  • 2012: prices will appreciate .46%
  • 2013: prices will appreciate 2.18%
  • 2014: prices will appreciate 2.92%
  • 2015: prices will appreciate 3.47%

Accumulative appreciation (including this year’s projected depreciation) will stand at 5.71% in 2015.

Bottom Line

The experts say home prices will begin to see appreciation next year and return to historic levels of annual appreciation by 2015.

Post courtesy of KCMBlog.com

 

4 Financial Reasons to Buy a Home Now

As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.

4 Reasons to Buy a Home Now

Interest Rates Are Increasing

Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.

The 30-Year Mortgage May Disappear

There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage?

QRM Requirements Could Be Much More Stringent

Here are proposed changes to the requirements for a ‘qualified residential mortgage’:

  • Certain mortgage types would be eliminated
  • You would need to put a minimum of 20% down
  • You would need a minimum 690 FICO score
  • The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)

There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).

Rents Are Expected to Increase

The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:

“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”

Bottom Line

You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision. Hopefully these four financial reasons to buy a home can help you make a decision.

 

Are the Wealthy Buying Real Estate?

We have taken the stance that real estate is currently a great investment. There have been MANY that have let us know that they think we are crazy. Today, let’s look at a few prominent people, media sources and one very important group that agree that now is the time to buy.

Fortune Magazine and The Wall Street Journal

John Paulson, billionaire investor.

Donald Trump, no introduction necessary.

Barbara Corcoran, real estate TV personality.

A pretty impressive list!

So are the wealthy buying real estate?

The real question: Is anyone listening to them? The answer: The wealthiest people in the country. According to the most recent Existing Sales Report from the National Association of Realtors, at a time when sales of all homes have decreased 2.8% compared to last year, homes over $1million dollars are selling at a rate 3.9% higher.

Why are the wealthy buying real estate right now?

  • Money is cheap. The 5% interest rate will not be available forever.
  • The ability to lock in that interest rate for 30 years may soon disappear.
  • Getting a mortgage may get much more expensive soon.
  • They want to buy low and sell high. The price of real estate is low.

Bottom Line

We know many will disagree with us about now being the time to buy. But if the wealthiest people in the country are buying real estate, shouldn’t we at least consider the possibility?

Say Farewell to 100-watt Incandescent Lightbulbs

New lighting efficiency rules take effect nationwide January 1, 2012

Prepare to say goodbye to the venerable 100-watt “general-service” incandescent bulb. In less than one year – as of January 1, 2012 – it will be a violation of the Energy Independence and Security Act (EISA) of 2007 (Public Law 110-140) to import the bulbs to the United States or to manufacture them there. In California, state law banned the bulb as of January 1, 2011.

According to the National Lighting Bureau, the nationwide new lighting efficiency rule are the first of several designed to reduce energy waste. Mary Beth Gotti, a member of the NLB’s board of directors and manager of GE Lighting’s GE Lighting Institute, said that “light bulbs are now subject to the same kind of standard used to measure automobile efficiency; output per unit of input. For automobiles, it’s measured as MPG; miles travelled per gallon of gasoline required to operate the vehicle. For light bulbs, it’s measured as LPW; that’s lumens – a measure of the amount of light produced – per watt of electric power required to operate the bulb. Conventional 100-watt incandescent light bulbs produce about 17 lumens per watt, a rating that’s too low to meet the new standards.

“While the phase-out will help the nation significantly reduce electrical consumption and the greenhouse-gas emissions associated with the production of some electricity, the impact on consumers is not nearly as big a deal as some people are making it out to be,” Ms. Gotti said. “Standard-compliant halogen bulbs are readily available for those who want to keep using incandescent technology.”

Ms. Gotti explained that halogen bulbs use the same incandescent principles Edison patented some 135 years ago, but they are filled with halogen, a gas that permits the lamps to burn hotter and therefore emit more lumens per watt. A 72-watt halogen lamp that looks more or less identical to a conventional 100-watt incandescent bulb is about one-third more efficient, achieving more than 20 lumens per watt. While the higher efficiency results in lower operating costs, the halogen replacement generally costs two to three times as much as a 100-watt incandescent, a cost difference that in many cases can be more than offset by the value of the energy saved over the halogen bulb’s 1,000-hour life.

Compact fluorescent bulbs – properly referred to as compact fluorescent lamps or CFLs – produce about 62.5 lumens per watt, about four times the amount of light that incandescent lamps produce on a watt-for-watt basis, and they last ten times as long. The 26-watt CFL that is used to replace a 100-watt incandescent bulb costs about the same as a 72-watt halogen bulb.

Although the typical CFL is a coiled device, CFLs are available in many sizes and shapes. Some are manufactured with outer bulbs that make them look just like conventional 100-watt incandescent bulbs. Dimmable CFLs also are available; only those CFLs designated as dimmable will function properly when used with a dimmer.

Solid-state lighting, incorporating light-emitting diode (LED) technology, can also be used to replace incandescents. At 75 lumens per watt, the 10-watt LEDs used to replace 100-watt incandescent bulbs are about 20% more efficient than CFLs, but they can last six or more times as long; that’s about 65 to 70 times as long as conventional 100-watt incandescent bulbs.

The impediment to widespread LED use is a comparatively high cost (about $30 or so for some 10-watt LEDs), but prices are rapidly declining.

“The energy consumed and green-house gases associated with 100-watt incandescent bulbs are not the only concerns,” said Bureau Chair Howard P. Lewis (Lighting Alternatives, Inc.), the Illuminating Engineering Society of North America’s representative on the Bureau’s board of directors.

“The bulbs’ relatively brief life span means more energy and raw materials are used for manufacture, packaging, and transportation. The lamps also produce a great deal of heat, increasing the amount of energy used for summer air-conditioning in many parts of the nation and, in some, year-round.”

Despite the drawbacks they share with 100-watt general-service incandescent bulbs, most 100-watt specialty incandescent bulbs are not affected by the new lighting efficiency rules. The specialty bulbs include, among others: 3-way bulbs; appliance lights; “bug lights”; infrared and colored bulbs; shatter-resistant, vibration-service, and rough-service bulbs; bulbs used in signs; and bulbs used for marine, mine, and traffic applications.

As the new lighting efficiency rules take effect, 75-watt general-service incandescent bulbs will begin disappearing from retailers’ shelves, followed by 60-watt and 40-watt general-service incandescent bulbs starting January 1, 2014. Halogen, CFL, and LED replacements for these three lamps are already being sold.

Also affected – sooner rather than later – are many of the incandescent reflector lamps now commonly used; bulbs identified with letters such as R, ER, and PAR. Their import to and manufacture in the United States will be banned starting July 14, 2012. A number of halogen-reflector lamps (e.g., PAR 20s, PAR 30s, and PAR 38s) can already meet the new lighting efficiency rules, and newer alternatives are being introduced almost weekly. These include incandescent reflector lamps that use advanced infrared (IR) coatings to generate more lumens per watt, and optimized-reflector coatings that direct light more efficiently.

Those who wish to obtain a copy of Public Law 110-140 – the Energy Independence and Security Act (EISA) of 2007 – can do so by sending their request to [email protected].

Will these new lighting efficiency rules affect your household or are you already using the new CFL bulbs?