How Are Existing Home Sales Doing At This Time?

The National Association of Realtors recently put out new statistics on existing home sales. This is great news and based on new job creation and the recovering economy, I think the uptrend will continue. As always, if you have any questions on what is going on in your particular neighborhood, do not hesitate to ask.

The uptrend in existing-home sales continues, with January 2011 sales rising for the third consecutive month with a pace that is now above year-ago levels, according to the National Association of REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 2.7% to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3% above the 5.09 million level in January 2010. This is the first time in seven months that sales activity was higher than a year earlier.
Lawrence Yun, NAR chief economist, said the improvement is good but could be better. “The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence,” said Lawrence Yun, NAR chief economist. “The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity.”
A parallel NAR practitioner survey shows first-time buyers purchased 29% of homes in January, down from 33% in December and 40% in January 2010 when an extended tax credit was in place.
Investors accounted for 23% of purchases in January, up from 20% in December and 17% in January 2010; the balance of sales were to repeat buyers. All-cash sales rose to 32% in January from 29% in December and 26% in January 2010.
“Increases in all-cash transactions, the investor market share and distressed home sales all go hand-in-hand. With tight credit standards, it’s not surprising to see so much activity where cash is king and investors are taking advantage of conditions to purchase undervalued homes,” Yun said.
All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15% of the market. The average of all-cash deals was 20% in 2009, rising to 28% last year.
The national median existing-home price for all housing types was $158,800 in January, down 3.7% from January 2010. Distressed homes edged up to a 37% market share in January from 36% in December; it was 38% in January 2010.
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the median price is being dampened by unusual market factors.
“Unprecedented levels of all-cash purchases, primarily of distressed homes sold at deep discounts, undoubtedly pulls the median price downward,” Phipps said. “Given the levels of inventory we see today, we believe that traditional homes in good condition have held their value.”
Total housing inventory at the end of January fell 5.1% to 3.38 million existing homes available for sale, which represents a 7.6-month supply at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.76% in January from 4.71% in December; the rate was 5.03% in January 2010.
Single-family home sales rose 2.4% to a seasonally adjusted annual rate of 4.69 million in January from 4.58 million in December, and are 4.9% higher than the 4.47 million level in January 2010. The median existing single-family home price was $159,400 in January, down 2.7% from a year ago.
Existing condominium and co-op sales increased 4.7% to a seasonally adjusted annual rate of 670,000 in January from 640,000 in December, and are 7.9% above the 621,000-unit pace one year ago. The median existing condo price was $154,900 in January, which is 10.2% below January 2010.
Regionally, existing-home sales in the Northeast fell 4.6% to an annual pace of 830,000 in January from a spike in December and are 1.2% below January 2010. The median price in the Northeast was $236,500, which is 4.0% below a year ago.
Existing-home sales in the Midwest rose 1.8% in January to a level of 1.14 million and are 3.6% above a year ago. The median price in the Midwest was $126,300, which is 3.2% below January 2010.
In the South, existing-home sales increased 3.6% to an annual pace of 2.02 million in January and are 8.0% higher than January 2010. The median price in the South was $136,600, down 2.1% from a year ago.
Existing-home sales in the West rose 7.9% to an annual level of 1.37 million in January and are 7.0% above January 2010. The median price in the West was $193,200, down 5.7% from a year ago.

How is the Denver real estate market compared to other metro areas?

The Denver-area housing market ended 2010 as the best-performing housing market between the coasts, shows the closely watched S&P/Case-Shiller Home Price Indices released today.

Denver-area homes on average lost 2.4 percent in December from December 2009, shows the report that tracks 20 major metropolitan statistical areas. The decline was the same as the overall drop for all 20 cities and Denver was the seventh best performing city in the index on a year-over-year basis. Washington, D.C. was No. 1, with homes rising 4.1 percent. San Diego, the only other city in positive territory, showed a 1.7 percent increase. San Francisco, Los Angeles, Boston, and New York also did better than Denver. From November to December, Denver showed a 0.7 percent drop, compared to a 1 percent drop for all 20 cities.

Denver in a good place

“It really sounds like a pretty good win for Denver,” said Peter Niederman, CEO of the Kentwood Co. “It sounds like Denver fared pretty well. I think Denver is in a pretty good spot right now. We’re seeing good traffic and showings, although they are not turning into contracts as much as we had hoped to see. Still, traffic is a leading indicator. And we are seeing traffic at all price points. I still hold to my prediction that when the year is over, we will be up 3 percent to 5 percent from last year. The first quarter and second quarter will be kind of hard to compare to Q1 and Q2 of last year, because we had the tax incentives in the first part of 2010, while we don’t have them anymore.” More than anything, what will help Denver and the nation’s housing market is job growth and a drop in the unemployment rate, he said. “When there is job growth, people will feel like there is more security in their jobs,” Niederman said. “Until then, we will kind of bounce around at the bottom. Sometimes we will drift a little bit lower and sometimes we will drift a bit higher.”

National view weak

From a national perspective, David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, was not very bullish.
“We ended 2010 with a weak report,” Blitzer said. “The National Index (at Case-Shiller) is down 4.1% from the fourth quarter of 2009 and 18 of 20 cities are down over the last 12 months. Both monthly Composites and the National Index are moving closer to their 2009 troughs. The National Index is within a percentage point of the low it set in the first quarter of 2009. Despite improvements in the overall economy, housing continues to drift lower and weaker.

“Unlike the 2006 to 2009 period when all cities saw prices move together, we see some differing stories around the country,” Blitzer continued. “California is doing better with gains from their low points in Los Angeles, San Diego and San Francisco. At the other end is the Sun Belt – Las Vegas, Miami, Phoenix and Tampa. All four made new lows in December. Also seeing renewed weakness are some cities that were among the last to reach their peaks including Atlanta, Charlotte, Portland and Seattle, where news lows were also seen. Dallas, which peaked late, has so far stayed above its low marked in February 2009.”

The report shows that the 10- and 20-City Composite indices remain above their spring 2009 lows; however, 11 markets – Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland, Seattle and Tampa – hit their lowest levels since home prices peaked in 2006 and 2007. More markets hit new lows in each of the past three months.

“Looking deeper into the monthly data, 19 MSAs and both Composites were down in December over November,” Blitzer said. “The only one which wasn’t was Washington DC, up 0.3%. With December 2010 index levels of 99.73 and 99.48, respectively, Cleveland and Las Vegas have the dubious distinction of average home prices now below their January 2000 levels. Detroit was the only market that was in that group prior to December.”

Changes in FHA Mortgage Insurance Premium

Many home buyers, especially first time buyers, choose to do FHA financing. I think it is a great choice if you want to conserve upfront cash. FHA financing requires you to only put down a 3.5% down payment and rates are similar to conventional financing. A mortgage expert can go over the different types of loans with you and find which one works best for your own personal situation. FHA has recently announced that a monthly mortgage insurance premium increase will come into play on new loans starting on or after April 18th. The article below explains more.

FHA Announces Monthly Mortgage Insurance (MIP) Increase

Feb 15, 2011 (www.mortgageorb.com)

The Federal Housing Administration (FHA) has announced a new premium structure for FHA-insured mortgage loans that increases its annual mortgage insurance premium (MIP) by a quarter of a percentage point on all 15- and 30-year loans. The up-front MIP will remain unchanged at 1% and will impact new loans insured by the FHA on or after April 18.

According to the FHA, this premium change enables the agency to increase revenues to preserve the stability of its Mutual Mortgage Insurance fund, which had capital reserves of approximately $3.6 billion at the end of fiscal year 2010. The change is estimated to contribute nearly $3 billion annually to the fund, based on current volume projections.
Furthermore, the FHA estimates that on average, new borrowers will pay approximately $30 more per month.

"After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA's capital reserves and help private capital return to the housing market," says FHA Commissioner David H. Stevens. "This quarter point increase in the annual MIP is a responsible step towards meeting the congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost-effective mortgage insurance option for borrowers with lower incomes and lower down payments."

Here are the 7 things you need to know about these changes:
These changes are effective April 18th, 2011.

1. The Annual Insurance Premium will increase .25% for standard forward mortgages.

2. The Upfront Mortgage Insurance remains at 1.00%.

3. The Annual Premium is now 1.15% for LTV’s GREATER than 95% on 30 year loans.


4. The Annual Premium is now 1.10% for LTV’s EQUAL to or LESS than 95% on 30 year loans.


5. The Annual Premium is now .50% for LTV’s GREATER than 90% on 15 year loans.

6. The Annual Premium is now .25% for LTV’s EQUAL to or LESS than 90% on 15 year loans.

7. Case numbers with no activity for 6 months will automatically be canceled (includes case numbers pulled prior to April 18th, 2011).

What are some tips to keep in mind if you are thinking about becoming a real estate investor?

With homeownership dropping and rental vacancy rates rising, it is clear many Americans are looking to make a change to renting instead of owning their home. Currently, homeownership levels are at 66.5%, the lowest they’ve been since 1998, reported recently by the Department of Commerce, and the rental vacancy rate at 9.3%, the highest its been since 2003. Many prospective investors could take this information and apply it to a very lucrative decision for future investment property purchases.

What is real estate investing?

Real estate can be a great long-term investment. It is a tangible, cash-generating asset and appreciates in value. Real estate investment has proven to be a powerful method of accumulating wealth over time and investors are getting a return on their investment (ROI) in three ways: cash flow, return on taxes and appreciation.

What are the benefits of real estate investing?

The main benefit of real estate investing is the profit that you can make if you handle your investment correctly. Having a rental property provides a source of regular income, but other than that, investment properties qualify for numerous tax deductions which may include cost of building maintenance and repairs and interest paid on loans related to the property.

Are you looking to rent or flip?

Before you start looking at properties, you should decide on what you are going to do with the property once you attain it. If you choose to buy, hold and rent it, take into consideration the responsibility it takes to be a landlord. You will need a lease agreement specifying what you will be responsible for maintaining, fixing, etc. and what the tenants will be responsible for like amount of rent, date of payments, leasing length, etc. Becoming a landlord can turn into a very profitable venture if you make sure you are well-versed in property management, including fair housing laws and eviction and collection procedures. While you can self-manage, it may be wise to outsource this to a local experienced and qualified property management company. Either way, you must maintain the property to best preserve its value so it can eventually be sold at a significant profit.

If you choose to flip the property, you must take into account any and all property updates and repairs that need to be made. The term “flipping” means that you purchase a home, repair it and resell for profit. Both renting and flipping can be substantial financial investments, so make sure you have a reasonable budget in mind for the possible updates that will need to be made. Flipping a home can be considered less of a responsibility than becoming a landlord, but you must keep in mind that someone will be living in the home you are flipping and you want to make sure they will find it worth their money to purchase and move into. Consult your attorney and lender for restrictions on flipping. Keep in mind that flipping may not be the wise choice in a down housing economy.

How are your finances?

The better your credit, the more likely you will be able to get a decent loan. Since lenders know people are more likely to default on investment property, they usually require bigger down payments, higher interest rates and stronger finances for rental property investors. It will also be prudent to have a cash reserve left over after buying the property to put toward unexpected vacancies, maintenance and repairs. Typically the lender will require 20-25% down on an investor loan. In some instances a 10% down payment may suffice.

Additional considerations-Location, location, location. If you decide on renting your investment property, make sure it is in an area where you can attract tenants. The same rules apply for finding a home to flip. When trying to sell a home, if it is located in a strong resale area, not only will you have a shorter hold time, but you will likely benefit from a greater return. Be sure to seek out a real estate agent that has experience advising investors not just owner-occupants.

Timeline and budget-Having a reasonable, realistic timeline and budget for repairs will prepare you for success in your investment venture. Make sure to stick to the guidelines you set for yourself so you can end up with as much profit as possible and not overpay for your investment. Do not over-improve. This is not your personal residence. Only make improvements that will either make it more attractive to sell/rent, and/or will reduce your hold or vacancy time and ultimately show a return on your investment. There will always be unforeseen issues that may hold up construction or unexpected costs, but make allowances for such problems and you will stay on track.

Where can I find an affordable home to invest in?

With home prices at an all-time low, we are currently in a buyer’s market. There are many houses on the market being sold well below tax value that are just waiting to have a little TLC given to them to make them shine again. Seek out a real estate professional that specializes in real estate owned (REO), short sale and distressed properties and who also has experience working with investors.