It seems many places I go, the conversation of real estate always comes up even before someone asks what I do for my profession. This past Sunday, I stopped by a ladies' tea for a women's community group I am in and one of the other members and I started talking about interest rates for mortgages. They are at historic lows at this time (3.75% for a 30 year fixed rate), and the woman I was speaking of said her and her husband's first interest rate on their home was 18%. Wow!
Lately I have been running into multiple offer situations, mostly I beleive due to the lower interest rates, people moving to Colorado all the time, and the lack of inventory that is in great condition.
Below is an excerpt from the Denver Post regarding what others are seeing in the market:
A lack of inventory — or, more precisely, "compelling" inventory, as some agents call it — has complicated homebuying for people and added yet another strain on a long-stressed housing market.
Homes in the $300,000-to- $600,000 range in Denver's older neighborhoods and places such as Highlands Ranch can move surprisingly fast.
When people have it overpriced or don't have it ready to go, it doesn't go.
The number of homes listed for sale in Denver is down by about half since the frenzy surrounding the April 2010 deadline for a homebuyer tax credit.
The inventory of homes available for sale in metro Denver in August was down 23 percent from August 2010, and down 5 percent from July, according to statistics compiled by independent real-estate analyst Gary Bauer.
There were 18,164 homes and condos listed for sale in metro Denver, compared with 23,615 in August 2010.
"This low inventory is surprising," said Bauer, who had expected inventory levels to hold around 24,000. "It will make the housing market that much more difficult to work in."
But so far, that doesn't appear to be happening, and Bauer doesn't expect it to, given the other pressures on the market. The median home price in metro Denver fell to $235,000 in August from $239,000 a year earlier.
The upper end of the market continues to struggle with too many homes and lengthy times on the market. But even the low end, once glutted with foreclosures and short sales, is starting to see inventory dry up.
Wes Schlapman, an associate agent with Home4You, said he has struggled to find foreclosures and bank-owned homes that will work for fix-and-flips.
He can sell the homes after he fixes them, but finding them has become the hard part.
Foreclosure filings are down sharply in Denver, and the homes that go to auction are only a fraction of that number.
That is just one of several reasons why the inventory of unsold homes is shrinking, Bauer said.
Many sellers are on strike, in that they don't have to sell and won't until prices improve. Other sellers might prefer to sell but owe more than their homes are worth and can't afford to bring money to the closing table.
Tight credit is another factor. Buyers have to put more money down to obtain a mortgage, and lenders are less likely to cover the costs of home improvements than in the past, putting turnkey properties in demand.
Tuesday, September 13, 2011
Monday, August 22, 2011
Rates? Lowest in 50 Years
Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates, fixed and adjustable, reaching all-time record lows providing further incentive for those homeowners looking to refinance. The 30-year fixed averaged 4.15 percent, breaking the previous record low of 4.17 percent set November 11, 2010.
30-year fixed-rate mortgage (FRM) averaged 4.15 percent with an average 0.7 point for the week ending August 18, 2011, down from last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.42 percent.
15-year FRM this week averaged 3.36 percent with an average 0.6 point, down from last week when it averaged 3.50 percent. A year ago at this time, the 15-year FRM averaged 3.90 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.08 percent this week, with an average 0.5 point, down from last week when it averaged 3.13 percent. A year ago, the 5-year ARM averaged 3.56 percent.
1-year Treasury-indexed ARM averaged 2.86 percent this week with an average 0.6 point, down from last week when it averaged 2.89 percent. At this time last year, the 1-year ARM averaged 3.53 percent.
Frank Nothaft, vice president and chief economist, Freddie Mac, reports, "The Federal Reserve's policy statement last week and ongoing market concerns over the European debt market carried momentum into this week allowing all mortgage products in our survey to reach all-time record lows. For instance, 30-year fixed mortgage rates are now the lowest in over 50 years. In comparison, the Bureau of Economic Analysis estimated the average effective mortgage rate was about 5.3 percent on single-family loans outstanding during the second quarter of 2011."
"Not surprising, many homeowners took advantage of this low mortgage rate environment and have already refinanced their loans. The refinance share of applications averaged nearly 70 percent of all mortgage activity in the first half of this year, according to our survey. In addition, an increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter, according to Freddie Mac's Quarterly Product Transition Report."
30-year fixed-rate mortgage (FRM) averaged 4.15 percent with an average 0.7 point for the week ending August 18, 2011, down from last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.42 percent.
15-year FRM this week averaged 3.36 percent with an average 0.6 point, down from last week when it averaged 3.50 percent. A year ago at this time, the 15-year FRM averaged 3.90 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.08 percent this week, with an average 0.5 point, down from last week when it averaged 3.13 percent. A year ago, the 5-year ARM averaged 3.56 percent.
1-year Treasury-indexed ARM averaged 2.86 percent this week with an average 0.6 point, down from last week when it averaged 2.89 percent. At this time last year, the 1-year ARM averaged 3.53 percent.
Frank Nothaft, vice president and chief economist, Freddie Mac, reports, "The Federal Reserve's policy statement last week and ongoing market concerns over the European debt market carried momentum into this week allowing all mortgage products in our survey to reach all-time record lows. For instance, 30-year fixed mortgage rates are now the lowest in over 50 years. In comparison, the Bureau of Economic Analysis estimated the average effective mortgage rate was about 5.3 percent on single-family loans outstanding during the second quarter of 2011."
"Not surprising, many homeowners took advantage of this low mortgage rate environment and have already refinanced their loans. The refinance share of applications averaged nearly 70 percent of all mortgage activity in the first half of this year, according to our survey. In addition, an increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter, according to Freddie Mac's Quarterly Product Transition Report."
Wednesday, August 17, 2011
What are some good, inexpensive updates before listing your home?
Well, the nights are starting to get shorter and fall seems to be on it's way. I don't know about you, but I am not quite ready. We are lucky to have all four seasons here in Colorado, but something about the summer months makes things feel more carefree. Maybe it is thinking about having summer breaks while growing up.
There is no perfect formula for selling your home efficiently, but by following these five tips prior to listing you can increase your chances to close quickly at a higher price.
1.) Update your old garage door(s). Garage doors seem like a non-issue, but many times they make up a significant percentage of the front of a home. Because of this, they are one of the first things that buyers notice when they pull in the drive way. Replacing, or even just painting, these central fixtures will do wonders when it comes to instantly impressing perspective buyers and standing apart from your competition. The market has changed drastically since many of us purchased our homes here in town. I frequently hear buyers say that they have taken a house off their list because of the lack of curb appeal. This issue is especially important to people on busier streets, corner lots, or near a neighborhood eyesore.
2.) Replace old windows. Outdated windows age a home significantly, and you can often upgrade standard windows to vinyl for a reasonable $300 per window. The average home has 8 windows, so this upgrade doesn’t cost nearly as much as you might think and it will make a huge difference to the value perceived by prospective buyers. Key point to remember is that when buyers view a home they love, if they see it has older windows, they consider it a time consuming and costly headache. First time buyers have never replaced windows and often dramatically overestimate the cost to cure this issue. By replacing pre-listing you an actually save money. A well priced, move-in condition home will sell for far more than one with windows in need of repair.
3.) Assess your floors . If you have hardwood flooring, it’s worth the investment to have them refinished considering buyers put an extremely high value on them; you’ll get the most bang for your buck if they are refurbished. Carpets should be shampooed and replaced if they are stained or look worn. You don’t need to spend large amounts of money on the highest grade or most modern name but something inexpensive and neutral will certainly bring you a return on the investment. Even the smell of new carpet will make buyers set your home apart from the comparables.
4.) Paint the trim. If you can’t afford the daunting task of painting your entire house, painting just the trim will still make a big difference when it comes to curb appeal. Painting the whole house can be expensive, time consuming, and delayed by weather conditions; painting just the trim will give your home a fresher look. Interior trim is equally as important.
5.) Update fixtures. Keep an eye out for sales at home improvement stores and replace outdated lighting, plumbing and hardware fixtures. Simple replacing lighting fixtures and knobs in the bathroom or kitchen can update the entire look of the room. You can find many modern brand name fixtures online on contractor supply websites by just searching for terms like sale faucets, sale plumbing fixtures etc.
There is no perfect formula for selling your home efficiently, but by following these five tips prior to listing you can increase your chances to close quickly at a higher price.
1.) Update your old garage door(s). Garage doors seem like a non-issue, but many times they make up a significant percentage of the front of a home. Because of this, they are one of the first things that buyers notice when they pull in the drive way. Replacing, or even just painting, these central fixtures will do wonders when it comes to instantly impressing perspective buyers and standing apart from your competition. The market has changed drastically since many of us purchased our homes here in town. I frequently hear buyers say that they have taken a house off their list because of the lack of curb appeal. This issue is especially important to people on busier streets, corner lots, or near a neighborhood eyesore.
2.) Replace old windows. Outdated windows age a home significantly, and you can often upgrade standard windows to vinyl for a reasonable $300 per window. The average home has 8 windows, so this upgrade doesn’t cost nearly as much as you might think and it will make a huge difference to the value perceived by prospective buyers. Key point to remember is that when buyers view a home they love, if they see it has older windows, they consider it a time consuming and costly headache. First time buyers have never replaced windows and often dramatically overestimate the cost to cure this issue. By replacing pre-listing you an actually save money. A well priced, move-in condition home will sell for far more than one with windows in need of repair.
3.) Assess your floors . If you have hardwood flooring, it’s worth the investment to have them refinished considering buyers put an extremely high value on them; you’ll get the most bang for your buck if they are refurbished. Carpets should be shampooed and replaced if they are stained or look worn. You don’t need to spend large amounts of money on the highest grade or most modern name but something inexpensive and neutral will certainly bring you a return on the investment. Even the smell of new carpet will make buyers set your home apart from the comparables.
4.) Paint the trim. If you can’t afford the daunting task of painting your entire house, painting just the trim will still make a big difference when it comes to curb appeal. Painting the whole house can be expensive, time consuming, and delayed by weather conditions; painting just the trim will give your home a fresher look. Interior trim is equally as important.
5.) Update fixtures. Keep an eye out for sales at home improvement stores and replace outdated lighting, plumbing and hardware fixtures. Simple replacing lighting fixtures and knobs in the bathroom or kitchen can update the entire look of the room. You can find many modern brand name fixtures online on contractor supply websites by just searching for terms like sale faucets, sale plumbing fixtures etc.
Thursday, August 11, 2011
What is going on with rates at this time?
Things have been quite active this past week with the debt ceiling crisis coming to an end last Tuesday when an agreement was finally reached at the last minute. By the end of the week, Standard and Poor's went ahead and downgraded the U.S. credit rating. Although the stock market is dropping, low mortgage rates have survived both the debt crisis and U.S. downgrade.
Freerateupdate.com's daily survey of wholesale and direct lenders show that low mortgage rates have made it through these episodes and remain stable with only the jumbo 30 year fixed mortgage rate fluctuating by .125%. Remaining the same, 30 year fixed mortgage rates are at 4.125%, 15 year fixed mortgage rates are at 3.500% and 5/1 adjustable mortgage rates are at 2.750%. With good credit, borrowers can obtain these low mortgage rates with 0.7 to 1% origination fee. Currently, conforming mortgage rates are at the lowest levels of the year and remain a good opportunity for borrowers who receive lender approval.
By combining low FHA mortgage rates, that have remained steady, and low down payment requirements, borrowers can still attain affordable home ownership. Current FHA 30 year mortgage rates are at 4.000%, FHA 15 year mortgage rates are at 3.500% and FHA 5/1 adjustable mortgage rates are at 3.250%. FHA will accept gifts from family, employers and unions provided the necessary documentation is approved. Grants and loans issued by state, county and local housing initiatives are also combined with FHA mortgages in order to make the final transaction even more affordable. Although FHA closing costs (APR) tend to be higher because of various FHA fees and the upfront mortgage insurance premium, the benefits of FHA mortgages far outweigh these expenses.
Jumbo 30 year fixed mortgage rates are at 4.750%, which is up .125% from Wednesday. Remaining the same, jumbo 15 year fixed mortgage rates are at 4.375% and jumbo 5/1 adjustable mortgage rates are at 3.250%. Jumbo mortgage loans are not government insured and, therefore, are considered risky transactions. Because of this, borrowers must have excellent credit in order to obtain these low jumbo mortgage rates with 0.7 to 1% origination point. High end borrowers have benefited from affordable jumbo mortgage rates that have followed in the path of other mortgage rates by remaining competitive and low.
MBS prices (mortgage backed securities) were up most of the week, went down on Friday, and again are up this week. Mortgage rates change in the opposite direction of MBS prices. On the bright side, private sector jobs increased and mortgage applications were up as reported by the Mortgage Banker's Association. On the down side, factory orders decreased. Overall, investors are reacting to Friday's news that Standard and Poor's proceeded to downgrade the U.S. credit rating which turned out to be a boost for the bond market while, at the same time, tanking stocks. If investors continue to seek the safety of bonds, mortgage rates should remain low.
Tuesday, July 12, 2011
How is the Colorado housing market at this time?
Happy Summer! I hope you are enjoying all of the outdoor activities our state has to offer. There has been no shortage of negative headlines regarding the struggling housing markets in Denver and Colorado. However, based on home price data, one could make the case that Colorado is in a better position that many areas.
Consider these factors:
Household formation and population growth continues at strong rates.
Investors continue to put capital into areas where they’re buying up foreclosed homes.
There are signs of stability in the market, although it’s likely that home prices will continue a slow decline in the near term.
Still, questions linger: Why did Colorado’s foreclosure woes begin early, and will we recover earlier?
Economy soft pre-bubble
First, a look at the economic foundation that led to a shaky housing market, but not the collapse that cratered so many other markets. Part of the reason that the bubble in home prices in Colorado was so small can be attributed to the fact that Colorado’s economy wasn’t all that strong during the inter-recessionary period of 2003-2008. Growth was moderate during this period. Some might even say it was lackluster.
Economic growth in Colorado underperformed the nation from 2002 to 2006 and only started to do better than the nation in 2007 and 2008. But by then, home prices had already peaked and were on their way down.
The labor markets during this period were not particularly excellent, either. During the 1990s, the unemployment rate in Colorado was below the national rate for almost the entire decade, often ranging from two to five percent.
But from 2002 to 2006, the Colorado unemployment rate essentially mirrored the national rate, ranging from four to six percent, and it wasn’t until 2007 that the Colorado unemployment rate even started to get close to the sort of low rates that had been common from 1995 to 2001. But by then, a new recession was on the horizon and home prices had stagnated. In 2008, the good times ended, with economic growth turning negative and joblessness accelerating.
Thus, it may be that one of the reasons we saw foreclosures rising in Colorado sooner that most of the nation was simply the fact that the Colorado economy and labor markets, during what was a bubble time for much of the nation, was relatively fragile in Colorado.
It’s not clear that Colorado suffered higher rates predatory lending or “creative financing” than other states. Nor was the pattern of housing development much different in Colorado when compared to, say, the suburbs of California or Arizona or Florida. So we’re left looking to the larger economic context to provide answers for why foreclosures accelerated here first.
Higher they rise, the bigger the fall
It’s possible that in Colorado, without the big run-ups in home prices during the middle part of the decade, it didn’t take as long for problems with negative equity to show up. With so few years of robust economic growth and job growth between the decade’s two recessions, problems may have manifested themselves sooner as home prices began to fall, wage growth flattened and joblessness rose.
Ultimately, the lack of a bubble saved Colorado from the enormous home price declines, strategic defaults and other issues associated with the popping of a very large bubble, but it may also have paved the way for foreclosures to surface here at a time when many other markets were experiencing unprecedented increases in housing demand and prices.
Will Colorado’s foreclosure woes end early after starting early? That’s not apparent yet. Although Colorado continues to show signs of stability in prices and in demand, foreclosures themselves do remain at extremely high levels by historical standards. Foreclosure filings have consistently declined each month for the past six months, but even at the current rate of decline foreclosure totals are likely to end the year at double what they were prior to 2005. This points to a need for a few more years of declines before foreclosure return to what might be considered a “normal level.”
The rate of decline is likely to be slow as well. With lenders and servicers processing foreclosures so slowly, it will take longer to move through the existing inventory we have. This problem isn’t unique to Colorado, of course, but it will have an effect here.
Colorado not immune to outside forces
Colorado real estate also is at the mercy of national and international credit markets, so if a globally or nationally weak economy continues to discourage real estate lending, Colorado will also feel the pinch.
On the other hand, Colorado continues to benefit from a desire among many Americans to relocate to Colorado. Population growth is relatively strong as is household formation. Mixing an increasing population with a small amount of new construction will undoubtedly help those who need to sell their houses to avoid foreclosure.
Job growth, however, will continue to be one of the biggest factors in driving down the foreclosure rate. Housing counselors report that job loss and income loss are the top reasons households go into foreclosure right now, and until we see the significant job gains that have eluded the state in recent years, foreclosures are likely to recede at a slow pace.
Consider these factors:
Household formation and population growth continues at strong rates.
Investors continue to put capital into areas where they’re buying up foreclosed homes.
There are signs of stability in the market, although it’s likely that home prices will continue a slow decline in the near term.
Still, questions linger: Why did Colorado’s foreclosure woes begin early, and will we recover earlier?
Economy soft pre-bubble
First, a look at the economic foundation that led to a shaky housing market, but not the collapse that cratered so many other markets. Part of the reason that the bubble in home prices in Colorado was so small can be attributed to the fact that Colorado’s economy wasn’t all that strong during the inter-recessionary period of 2003-2008. Growth was moderate during this period. Some might even say it was lackluster.
Economic growth in Colorado underperformed the nation from 2002 to 2006 and only started to do better than the nation in 2007 and 2008. But by then, home prices had already peaked and were on their way down.
The labor markets during this period were not particularly excellent, either. During the 1990s, the unemployment rate in Colorado was below the national rate for almost the entire decade, often ranging from two to five percent.
But from 2002 to 2006, the Colorado unemployment rate essentially mirrored the national rate, ranging from four to six percent, and it wasn’t until 2007 that the Colorado unemployment rate even started to get close to the sort of low rates that had been common from 1995 to 2001. But by then, a new recession was on the horizon and home prices had stagnated. In 2008, the good times ended, with economic growth turning negative and joblessness accelerating.
Thus, it may be that one of the reasons we saw foreclosures rising in Colorado sooner that most of the nation was simply the fact that the Colorado economy and labor markets, during what was a bubble time for much of the nation, was relatively fragile in Colorado.
It’s not clear that Colorado suffered higher rates predatory lending or “creative financing” than other states. Nor was the pattern of housing development much different in Colorado when compared to, say, the suburbs of California or Arizona or Florida. So we’re left looking to the larger economic context to provide answers for why foreclosures accelerated here first.
Higher they rise, the bigger the fall
It’s possible that in Colorado, without the big run-ups in home prices during the middle part of the decade, it didn’t take as long for problems with negative equity to show up. With so few years of robust economic growth and job growth between the decade’s two recessions, problems may have manifested themselves sooner as home prices began to fall, wage growth flattened and joblessness rose.
Ultimately, the lack of a bubble saved Colorado from the enormous home price declines, strategic defaults and other issues associated with the popping of a very large bubble, but it may also have paved the way for foreclosures to surface here at a time when many other markets were experiencing unprecedented increases in housing demand and prices.
Will Colorado’s foreclosure woes end early after starting early? That’s not apparent yet. Although Colorado continues to show signs of stability in prices and in demand, foreclosures themselves do remain at extremely high levels by historical standards. Foreclosure filings have consistently declined each month for the past six months, but even at the current rate of decline foreclosure totals are likely to end the year at double what they were prior to 2005. This points to a need for a few more years of declines before foreclosure return to what might be considered a “normal level.”
The rate of decline is likely to be slow as well. With lenders and servicers processing foreclosures so slowly, it will take longer to move through the existing inventory we have. This problem isn’t unique to Colorado, of course, but it will have an effect here.
Colorado not immune to outside forces
Colorado real estate also is at the mercy of national and international credit markets, so if a globally or nationally weak economy continues to discourage real estate lending, Colorado will also feel the pinch.
On the other hand, Colorado continues to benefit from a desire among many Americans to relocate to Colorado. Population growth is relatively strong as is household formation. Mixing an increasing population with a small amount of new construction will undoubtedly help those who need to sell their houses to avoid foreclosure.
Job growth, however, will continue to be one of the biggest factors in driving down the foreclosure rate. Housing counselors report that job loss and income loss are the top reasons households go into foreclosure right now, and until we see the significant job gains that have eluded the state in recent years, foreclosures are likely to recede at a slow pace.
Thursday, June 30, 2011
What is happening with rates at this time?
Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), which shows mortgage rates mixed but holding steady for the second week with the 30-year fixed matching last week's 4.50 percent average and the 15-year fixed edging up to 3.69 percent.
30-year fixed-rate mortgage (FRM) averaged 4.50 percent with an average 0.8 point for the week ending June 23, 2011, unchanged from last week when it averaged 4.50 percent. Last year at this time, the 30-year FRM averaged 4.69 percent.
15-year FRM this week averaged 3.69 percent with an average 0.7 point, up from last week when it averaged 3.67 percent. A year ago at this time, the 15-year FRM averaged 4.13 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.25 percent this week, with an average 0.6 point, down from last week when it averaged 3.27 percent. A year ago, the 5-year ARM averaged 3.84 percent.
1-year Treasury-indexed ARM averaged 2.99 percent this week with an average 0.5 point, up from last week when it averaged 2.97 percent. At this time last year, the 1-year ARM averaged 3.77 percent.
Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Mortgage rates were virtually unchanged this week amid further indications of a soft housing market. Although new construction on single-family homes ticked up in May from April, it was still below the overall pace set in 2010. Moreover, existing home sales fell 3.8 percent in May to the fewest since November 2010." "The Federal Reserve also reiterated that the housing sector continues to be depressed in its June 22nd policy committee statement. The S&P/Case-Shiller® National Home Price Index fell 2.1 percent between the fourth quarter of 2010 and first quarter 2011. Based on a recent survey by MarcoMarkets of 108 professional forecasters taken in early June, the index is predicted to decline another 1.5 percent by the fourth quarter of this year."
30-year fixed-rate mortgage (FRM) averaged 4.50 percent with an average 0.8 point for the week ending June 23, 2011, unchanged from last week when it averaged 4.50 percent. Last year at this time, the 30-year FRM averaged 4.69 percent.
15-year FRM this week averaged 3.69 percent with an average 0.7 point, up from last week when it averaged 3.67 percent. A year ago at this time, the 15-year FRM averaged 4.13 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.25 percent this week, with an average 0.6 point, down from last week when it averaged 3.27 percent. A year ago, the 5-year ARM averaged 3.84 percent.
1-year Treasury-indexed ARM averaged 2.99 percent this week with an average 0.5 point, up from last week when it averaged 2.97 percent. At this time last year, the 1-year ARM averaged 3.77 percent.
Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Mortgage rates were virtually unchanged this week amid further indications of a soft housing market. Although new construction on single-family homes ticked up in May from April, it was still below the overall pace set in 2010. Moreover, existing home sales fell 3.8 percent in May to the fewest since November 2010." "The Federal Reserve also reiterated that the housing sector continues to be depressed in its June 22nd policy committee statement. The S&P/Case-Shiller® National Home Price Index fell 2.1 percent between the fourth quarter of 2010 and first quarter 2011. Based on a recent survey by MarcoMarkets of 108 professional forecasters taken in early June, the index is predicted to decline another 1.5 percent by the fourth quarter of this year."
Tuesday, June 7, 2011
Is it the right time to buy a home?
I liked this article below from the Wall Street Journal. Only you know what is best for your lifestyle and what you want out of a home. A home is a great investment as long as you plan on staying a few years and not using your home as a piggy bank. I am a realist and believe that the Denver market is faring much better than many across the country. People want to live here. We have a great climate, jobs, educational system, the mountains close by, and not to mention some pretty amazing residents.
Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor's Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.
Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.
Such conditions might not last long. Moody's Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn't likely to get much worse. Meanwhile, demographic indicators such as "household formation"—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.
The upshot: "While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound," says Anthony Sanders, a real-estate finance professor at George Mason University.
The short-term outlook isn't encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.
But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.
So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.
Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn't battered by foreclosures, you may be close to a bottom already.
"The regular marketplace is hanging tough," says CoreLogic chief economist Mark Fleming.
Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor's Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.
Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.
Such conditions might not last long. Moody's Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn't likely to get much worse. Meanwhile, demographic indicators such as "household formation"—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.
The upshot: "While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound," says Anthony Sanders, a real-estate finance professor at George Mason University.
The short-term outlook isn't encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.
But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.
So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.
Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn't battered by foreclosures, you may be close to a bottom already.
"The regular marketplace is hanging tough," says CoreLogic chief economist Mark Fleming.
Subscribe to:
Posts (Atom)
