This article describes how foreclosures are driving home value now in the Phoenix market. If you live in an area of high foreclosure it can cost you $20-40,000 if you need to sell:
In a normal housing market, most homes to go into foreclosure are sold at trustee-sale auctions. Since last fall, about 98 percent of all homes to go into foreclosure have instead been taken back by the lender.
What lenders resell foreclosure homes for now is driving home values, particularly in neighborhoods where a higher percentage of existing-home sales are foreclosure resales.
Foreclosure resales make up at least one-fourth of all sales in a many Valley neighborhoods now. In a few areas, the rate of foreclosure resale is much higher. In the El Mirage ZIP code 85335, there were more foreclosure resales than regular resales. The overall median home price in the area is $135,000. The foreclosure resale is $133,750. In most other Valley neighborhoods, the overall median price is $20,000 to $40,000 higher than the foreclosure resale.
"These foreclosure homes need to sell for the Valley's housing market to recover," said Brett Barry, a Phoenix real-estate agent with Realty Executives. "It's a good thing they are selling, but it's not going to make you happy if you are a homeowner in a neighborhood with a lot of these properties."
He said for buyers who are patient and will work with lenders, there are great deals in foreclosure resales.
Gloria Giroux recently bought a foreclosure-resale home from Deutsche Trust Bank. She paid $560,000 for a 3,400-square-foot Carefree home on a half-acre lot that had sold for $815,000 in 2005. "The pool was green. It needed work, and it was frustrating waiting for answers on my offers from the bank," Giroux said. "But I got it, and the house behind me is almost identical and sold for $839,000 in April of this year."
Gloria seems to have made $279,000 in equity (two or three years of hard labor for most) by putting up with a little frustration from the bank.
Link to full article
Thursday, October 23, 2008
Friday, September 5, 2008
Foreclosure Effect on Home Prices May Be Small
I found some encouragement in this article -- home prices are "quite sticky"
September 5, 2008, 3:58 pm
Foreclosure Effect on Home Prices May Be Small
Even though data Friday from the Mortgage Bankers Association indicated that U.S. foreclosures hit a record in the second quarter, that won’t necessarily translate into big declines in home prices.
(Getty Images)
That appears to be the conclusion based on the findings of a trio of economists in a National Bureau of Economic Research paper.
“Even in the face of an extreme foreclosure wave such as that experienced in 2007, our evidence indicates that foreclosure shocks have relatively small effects on U.S. house prices,” the authors, Charles Calomiris of Columbia University and Stanley Longhofer and William Miles of Wichita State University wrote.
The authors’ model incorporated MBA foreclosure and Ofheo home price data from 1981 to 2007, and used home foreclosure forecasts for 2008 and 2009 from Economy.com. The model included data on employment, building permits and existing home sales. In their paper, the authors said the study was first to estimate the effect of foreclosures on home prices for all the U.S.
Even under an “extreme” foreclosure shock scenario, with foreclosures up 75% compared to the baseline in 2008 and 2009, U.S. home prices only decline about 5.5% between the the second quarter of 2007 to the end of 2009, the authors estimated.
Home prices, they wrote, “are quite sticky,” and “fears of a major fall in house prices, with all of its attendant negative macroeconomic consequences, typically are not warranted even in extreme foreclosure circumstances.”
“We conclude that a reasonable estimate of the future path of U.S. housing market prices is that they will remain essentially flat, on average, for the next two years notwithstanding the large predicted increase in foreclosures,” they wrote. –Brian Blackstone
September 5, 2008, 3:58 pm
Foreclosure Effect on Home Prices May Be Small
Even though data Friday from the Mortgage Bankers Association indicated that U.S. foreclosures hit a record in the second quarter, that won’t necessarily translate into big declines in home prices.
(Getty Images)
That appears to be the conclusion based on the findings of a trio of economists in a National Bureau of Economic Research paper.
“Even in the face of an extreme foreclosure wave such as that experienced in 2007, our evidence indicates that foreclosure shocks have relatively small effects on U.S. house prices,” the authors, Charles Calomiris of Columbia University and Stanley Longhofer and William Miles of Wichita State University wrote.
The authors’ model incorporated MBA foreclosure and Ofheo home price data from 1981 to 2007, and used home foreclosure forecasts for 2008 and 2009 from Economy.com. The model included data on employment, building permits and existing home sales. In their paper, the authors said the study was first to estimate the effect of foreclosures on home prices for all the U.S.
Even under an “extreme” foreclosure shock scenario, with foreclosures up 75% compared to the baseline in 2008 and 2009, U.S. home prices only decline about 5.5% between the the second quarter of 2007 to the end of 2009, the authors estimated.
Home prices, they wrote, “are quite sticky,” and “fears of a major fall in house prices, with all of its attendant negative macroeconomic consequences, typically are not warranted even in extreme foreclosure circumstances.”
“We conclude that a reasonable estimate of the future path of U.S. housing market prices is that they will remain essentially flat, on average, for the next two years notwithstanding the large predicted increase in foreclosures,” they wrote. –Brian Blackstone
Friday, August 29, 2008
http://www.courant.com/business/realestate/hc-homesales0829.artaug29,0,7234560.story
Click on the "Related Links" Decline in the House Graphic.
I think this graphic is useful in showing the relatively modest decline in CT housing prices in the last year relative to the 7 years of amazing growth (58.6%) that preceded it.
One might project (i.e. guess) that a plateau in this chart could develop around $260,000 during 2009 before we return to the modest 3.5% growth rate in 2010 similar to that we enjoyed in the year 2000 and then the whole 10 year cycle begins again.
But we must hasten to point out that if someone bought a median priced home in 2000 for $170,000 and they used a 10% deposit ($17,000). Their house would have grown to be valued to about $288,000 by 2007. (Little Side note: We bought ours for $180,000 in 1998 and got an appraisal of $360,000 in 2007). So the increase in equity during those seven years on the median priced house is a whopping $118,000. So their initial $17,000 investment grew to $118,000 in seven years which is 694% or almost 100% each of the seven years.
Here is how the annual increase looks in a spreadsheet:
Median Price
$170,000 The year 2000 Price
$12,750 (yearly increase)
$182,750 The year 2001 Price
$13,706 (yearly increase)
$196,456 The year 2002 Price
$14,734 etc.
$211,190
$15,839
$227,030
$17,027
$244,057
$18,304
$262,361
$19,677
$282,038 The year 2007 Price
Notice that the compounding effect of this 90% leveraged position allowed the homeowner to get an average of about 100% return ($17,000) on their initial investment each and every year for the seven years of expansion.
The key to having a great investment is being invested in the house during the period of expansion which may not be as easy to determine in advance. So the advice would be to buy and hold real estate to take advantage of these surges when they take place realizing that during a typical 10 year time horizon you will do just fine.
Click on the "Related Links" Decline in the House Graphic.
I think this graphic is useful in showing the relatively modest decline in CT housing prices in the last year relative to the 7 years of amazing growth (58.6%) that preceded it.
One might project (i.e. guess) that a plateau in this chart could develop around $260,000 during 2009 before we return to the modest 3.5% growth rate in 2010 similar to that we enjoyed in the year 2000 and then the whole 10 year cycle begins again.
But we must hasten to point out that if someone bought a median priced home in 2000 for $170,000 and they used a 10% deposit ($17,000). Their house would have grown to be valued to about $288,000 by 2007. (Little Side note: We bought ours for $180,000 in 1998 and got an appraisal of $360,000 in 2007). So the increase in equity during those seven years on the median priced house is a whopping $118,000. So their initial $17,000 investment grew to $118,000 in seven years which is 694% or almost 100% each of the seven years.
Here is how the annual increase looks in a spreadsheet:
Median Price
$170,000 The year 2000 Price
$12,750 (yearly increase)
$182,750 The year 2001 Price
$13,706 (yearly increase)
$196,456 The year 2002 Price
$14,734 etc.
$211,190
$15,839
$227,030
$17,027
$244,057
$18,304
$262,361
$19,677
$282,038 The year 2007 Price
Notice that the compounding effect of this 90% leveraged position allowed the homeowner to get an average of about 100% return ($17,000) on their initial investment each and every year for the seven years of expansion.
The key to having a great investment is being invested in the house during the period of expansion which may not be as easy to determine in advance. So the advice would be to buy and hold real estate to take advantage of these surges when they take place realizing that during a typical 10 year time horizon you will do just fine.
Sunday, August 10, 2008
OIL-RICH FUND EYEING FORECLOSED US HOMES
This interesting article is very believable. This would be one more sign that the market is getting ready for a transition. When we read ... "Hanson is now willing to pay 50 cents to 60 cents on the dollar for a collection of California REOs worth at least $500 million " we may be reaching the bottom of the market.
http://www.nypost.com/seven/08102008/business/lost_sovereignity_123879.htm
http://www.nypost.com/seven/08102008/business/lost_sovereignity_123879.htm
Sunday, July 27, 2008
Interest Statistic Worthy of Reflection -- Meditation
"Until the current downturn, median home prices had declined more than two months in a row only once, in 1990. But the decline now has lasted 22 straight months."
From this fact, I conclude:
1) Median home prices don't decline very often
2) Our current decline which began in late spring 2006 has been an unprecendently long one
3) Over the past 18 years real estate has been a great investment
4) This might be the best time to purchase real estate in 18 years.
From this fact, I conclude:
1) Median home prices don't decline very often
2) Our current decline which began in late spring 2006 has been an unprecendently long one
3) Over the past 18 years real estate has been a great investment
4) This might be the best time to purchase real estate in 18 years.
Friday, July 11, 2008
Real Estate Prices Rise for Four Straight Months - Is Anyone Noticing?
RISMEDIA, July 14, 2008-Amidst the gloom on Wall Street about housing someone forgot to check the stats. The National Association of Realtors® has now reported four straight months of rising housing prices, but it seems no one is listening.
According to NAR statistics, the median home price has fallen from a high of $230,200 in July 2006 to a low in February 2008 at $195,600, a drop of 15%. Since February, however, it has risen steadily every month. By May the index (which will be revised on July 24) had risen to $208,600, up $13,000 and a full 6.6%. Another indicator, the mean home price (otherwise known as the average home price), has also shown strength and has risen from a low of $242,000 also in February of this year to $253,100, a rise of $11,100 or 4.5%. It, too, has risen every month since February of this year.
“I just don’t know where Wall Street’s brains are today,” said David Michonski, CEO of Coldwell Banker Hunt Kennedy in New York City. “Everyone on the Street is wringing their hands over housing when in fact the average American has been out this spring buying homes and pushing the median price higher. This has got to go down as one of Wall Street and Main Street’s biggest disconnects in history.”
In addition, on an annualized basis the volume of home sales has also risen somewhat from a low of 4,890,000 homes in January to 4,990,000 in May.
“Rising prices on expanding volume should not a crisis make on Wall Street,” says Michonski.
So why the crisis?
“They say that there are bulls and bears on Wall Street but there are also pigs. Pigs try not just to profit from a crisis but create one to profit from. Today there are just so many people who have positioned themselves to profit from a crisis that they refuse to admit the reality of what is happening on Main Street. It might hurt their positions.”
Is this the bottom?
“No one can know for sure, but the hard data is clear. The median price has risen four straight months. The average American is out there taking advantage of bargains in their local real estate market. They are not listening to Wall Street but following their own belief that the best time to buy is when no one else is, and they are out there buying. If this keeps up, February may prove to have been the low in prices.”
“It is possible that it will not be Hank Paulson or Ben Bernanke who will pull this country out of a housing recession, but the good common sense of the average American whose affordability to buy a home is at a five year high and is acting on it.”
According to NAR statistics, the median home price has fallen from a high of $230,200 in July 2006 to a low in February 2008 at $195,600, a drop of 15%. Since February, however, it has risen steadily every month. By May the index (which will be revised on July 24) had risen to $208,600, up $13,000 and a full 6.6%. Another indicator, the mean home price (otherwise known as the average home price), has also shown strength and has risen from a low of $242,000 also in February of this year to $253,100, a rise of $11,100 or 4.5%. It, too, has risen every month since February of this year.
“I just don’t know where Wall Street’s brains are today,” said David Michonski, CEO of Coldwell Banker Hunt Kennedy in New York City. “Everyone on the Street is wringing their hands over housing when in fact the average American has been out this spring buying homes and pushing the median price higher. This has got to go down as one of Wall Street and Main Street’s biggest disconnects in history.”
In addition, on an annualized basis the volume of home sales has also risen somewhat from a low of 4,890,000 homes in January to 4,990,000 in May.
“Rising prices on expanding volume should not a crisis make on Wall Street,” says Michonski.
So why the crisis?
“They say that there are bulls and bears on Wall Street but there are also pigs. Pigs try not just to profit from a crisis but create one to profit from. Today there are just so many people who have positioned themselves to profit from a crisis that they refuse to admit the reality of what is happening on Main Street. It might hurt their positions.”
Is this the bottom?
“No one can know for sure, but the hard data is clear. The median price has risen four straight months. The average American is out there taking advantage of bargains in their local real estate market. They are not listening to Wall Street but following their own belief that the best time to buy is when no one else is, and they are out there buying. If this keeps up, February may prove to have been the low in prices.”
“It is possible that it will not be Hank Paulson or Ben Bernanke who will pull this country out of a housing recession, but the good common sense of the average American whose affordability to buy a home is at a five year high and is acting on it.”
Wednesday, June 4, 2008
"The froth has been completely blown away"
Quote of the Day
"We've covered a lot of territory in terms of restoring balance in the housing market. The froth has been completely blown away." - National City's chief economist, Richard DeKaser. DeKaser says the drastic declines in home price values have brought equilibrium back to many previously unaffordable U.S. housing markets. (CNN Money, June 2nd)
"We've covered a lot of territory in terms of restoring balance in the housing market. The froth has been completely blown away." - National City's chief economist, Richard DeKaser. DeKaser says the drastic declines in home price values have brought equilibrium back to many previously unaffordable U.S. housing markets. (CNN Money, June 2nd)
Tuesday, June 3, 2008
Today's financial sacrifices can result in big dividends in the future
Mike Summey -- Very successful Real Estate Investor gives some wise advice....
When I was a young man just getting started in life, I struggled. The product of a broken home and with little education, I struck out at the tender age of 15 to make it on my own. I remember those times when I woke up knowing I would have to earn money that day or I wouldn't be able to eat that night. Too proud to accept handouts and unwilling to turn to the government for help, I embarked on a journey that led to a most important discovery: I learned what is required to live the lifestyle of success.
I couldn't help but notice people around me who by middle age were living what appeared to be charmed lives. I never missed an opportunity to pick their brains and try to learn how they did it. The first thing I learned was that it is nearly impossible to earn your way to wealth. Sure, high-income earners often had big houses and fancy cars, but very few of them could sustain their standards of living if they were suddenly unable to work.
I also learned that truly wealthy people were the ones who were able to live on the income from their investments. They also seemed to be more relaxed because they weren't facing the daily pressures that having to earn an income to support a lavish lifestyles can bring. I wanted to be like them.
Once the income from your investments is adequate to cover the cost of your remaining days on earth, you have reached what I call "functional retirement," and there is no age limit associated with it. It's the point in life where you are able to choose what you do. If you wake up and want to play golf or go fishing, you can.
Many people lack patience and try to reach functional retirement too quickly. They play the lottery, invest in high-risk speculative ventures or turn to illegal activities in an attempt to get there with little sacrifice. They can't see themselves ever becoming wealthy, so they resign themselves to working the rest of their lives or scrimping by on a Social Security check in their elder years.
Another telling sign of impatience is people who mortgage their futures by committing tomorrow's income to buy more today. These are the ones who struggle to make payments on cars and boats and run up big credit card bills. Too many people in America suffer from an "I-want-it-now" syndrome. They fail to see how this mentality guarantees an "I-will-have-less" lifestyle later.
Life is like a bank account: You have to make deposits before you can make withdrawals. If you deposit part of your earnings each time you get paid and live on what's left, gradually your bank account grows. If you keep at it long enough, eventually the earnings from your investments can replace your paycheck.
"But," you say, "how can I invest when I can barely pay my bills now?" Answer: It's simple. You reduce your standard of living for a period of time just as you would if your income was suddenly cut by 10, 15 or 20 percent and you couldn't find another job to replace the loss. Is that easy? No. Is it possible? Absolutely.
Here's a tip: Pay yourself first. Each time you get paid, take a portion of your earnings and put it aside in some type of savings account. Then force yourself to live on what's left. It may mean you live in a smaller house or drive a smaller car, but doing so will result in a much higher standard of living in the future.
Developing the habit of saving is the secret to financial success. As long as you are saving and investing regularly, you are on the road to financial independence.
Many young people tell me that money isn't everything - they want to be happy too. But are those two things mutually exclusive, or have we just been brainwashed into thinking that way? If you want the real answer, ask elderly people who are struggling to keep a roof over their heads and food on the table. I'll bet they'll tell you they wish they had saved and invested when they were younger.
When I was a young man just getting started in life, I struggled. The product of a broken home and with little education, I struck out at the tender age of 15 to make it on my own. I remember those times when I woke up knowing I would have to earn money that day or I wouldn't be able to eat that night. Too proud to accept handouts and unwilling to turn to the government for help, I embarked on a journey that led to a most important discovery: I learned what is required to live the lifestyle of success.
I couldn't help but notice people around me who by middle age were living what appeared to be charmed lives. I never missed an opportunity to pick their brains and try to learn how they did it. The first thing I learned was that it is nearly impossible to earn your way to wealth. Sure, high-income earners often had big houses and fancy cars, but very few of them could sustain their standards of living if they were suddenly unable to work.
I also learned that truly wealthy people were the ones who were able to live on the income from their investments. They also seemed to be more relaxed because they weren't facing the daily pressures that having to earn an income to support a lavish lifestyles can bring. I wanted to be like them.
Once the income from your investments is adequate to cover the cost of your remaining days on earth, you have reached what I call "functional retirement," and there is no age limit associated with it. It's the point in life where you are able to choose what you do. If you wake up and want to play golf or go fishing, you can.
Many people lack patience and try to reach functional retirement too quickly. They play the lottery, invest in high-risk speculative ventures or turn to illegal activities in an attempt to get there with little sacrifice. They can't see themselves ever becoming wealthy, so they resign themselves to working the rest of their lives or scrimping by on a Social Security check in their elder years.
Another telling sign of impatience is people who mortgage their futures by committing tomorrow's income to buy more today. These are the ones who struggle to make payments on cars and boats and run up big credit card bills. Too many people in America suffer from an "I-want-it-now" syndrome. They fail to see how this mentality guarantees an "I-will-have-less" lifestyle later.
Life is like a bank account: You have to make deposits before you can make withdrawals. If you deposit part of your earnings each time you get paid and live on what's left, gradually your bank account grows. If you keep at it long enough, eventually the earnings from your investments can replace your paycheck.
"But," you say, "how can I invest when I can barely pay my bills now?" Answer: It's simple. You reduce your standard of living for a period of time just as you would if your income was suddenly cut by 10, 15 or 20 percent and you couldn't find another job to replace the loss. Is that easy? No. Is it possible? Absolutely.
Here's a tip: Pay yourself first. Each time you get paid, take a portion of your earnings and put it aside in some type of savings account. Then force yourself to live on what's left. It may mean you live in a smaller house or drive a smaller car, but doing so will result in a much higher standard of living in the future.
Developing the habit of saving is the secret to financial success. As long as you are saving and investing regularly, you are on the road to financial independence.
Many young people tell me that money isn't everything - they want to be happy too. But are those two things mutually exclusive, or have we just been brainwashed into thinking that way? If you want the real answer, ask elderly people who are struggling to keep a roof over their heads and food on the table. I'll bet they'll tell you they wish they had saved and invested when they were younger.
Housing market may turn more quickly than you expect
The following story provides a warning for would be home buyers. The market will turn but it may happen before you expect it or are ready for it.
IRWIN KELLNER
Home economics
Commentary: Housing market may turn more quickly than you expect
By Dr. Irwin Kellner, MarketWatch
Last update: 12:05 a.m. EDT June 3, 2008
PORT WASJHINGTON, N.Y. (MarketWatch) -- Here's an all-points bulletin to prospective homebuyers: The protracted decline in home prices has made many houses more affordable than they've been in years.
You know what this means? Housing could shift from a buyer's market to a seller's market before you know it.
Now don't get me wrong. I am not saying that all is copacetic when it comes to housing. Far from it.
I would agree with those who say that it will take many months before balance is restored between supply and demand. There are simply too many homes for sale at asking prices that are still too high for housing to do a 180.
Nor am I expecting another housing bubble to form, not in this decade anyway.
All I would like to point out is that, in broad macro terms, the average house is no longer as overpriced as it once was. That being the case, it is no longer prudent to assume that home prices have to fall a lot more before they stabilize.
For now, however, this is what most buyers believe. Knowing full well that there are a lot of unsold homes out there, most would-be buyers are waiting for a sign that prices have stopped falling and thus stabilized before making a bid.
They are waiting because history has conditioned them to do so.
Until recently, home prices used to go in only one direction, up, the only question being how fast. As a result, a house became just about the only item -- large or small -- that people would buy expecting its price to appreciate.
This kind of thinking does not apply to any other product the typical household purchases. Indeed, people routinely buy the latest cell phone, personal digital assistant, high-definition TV, or other electronic gadget fully expecting that those who buy after they do will probably pay less.
But housing is different - at least it used to be. Maybe now that people see that home prices can behave no differently than most other prices (They can go down as well as up), they will adapt a different attitude.
Getting back to affordability, loyal readers know that I believe that this measure is the best way to value a house.
I don't care about the cost of land, labor, building materials or the house next door. What matters to me is the ratio of home prices to household incomes (see my column of Feb. 4).
As of the April stats, the typical existing home cost 3.4 times estimated household incomes, while median new-home prices equaled almost 3.8 times family incomes.
These are down from the peak of 4.2 reached in the bubble year 2005, although they remain above the 2.8 figure that prevailed in the 1980s, when housing sold at a brisk pace.
But home prices don't have to get down to 2.8 times incomes to kick-start the market. A bit over three times might do it.
Remember, incomes are still rising, so home prices don't have to fall as much as you think before buyers decide that they can once more afford the home of their dreams. Sooner or later, the fact that housing is more affordable will sink in. That's when the market will turn.
And, no, my home is not for sale.
Irwin Kellner is chief economist for MarketWatch and for Capital One Bank.
IRWIN KELLNER
Home economics
Commentary: Housing market may turn more quickly than you expect
By Dr. Irwin Kellner, MarketWatch
Last update: 12:05 a.m. EDT June 3, 2008
PORT WASJHINGTON, N.Y. (MarketWatch) -- Here's an all-points bulletin to prospective homebuyers: The protracted decline in home prices has made many houses more affordable than they've been in years.
You know what this means? Housing could shift from a buyer's market to a seller's market before you know it.
Now don't get me wrong. I am not saying that all is copacetic when it comes to housing. Far from it.
I would agree with those who say that it will take many months before balance is restored between supply and demand. There are simply too many homes for sale at asking prices that are still too high for housing to do a 180.
Nor am I expecting another housing bubble to form, not in this decade anyway.
All I would like to point out is that, in broad macro terms, the average house is no longer as overpriced as it once was. That being the case, it is no longer prudent to assume that home prices have to fall a lot more before they stabilize.
For now, however, this is what most buyers believe. Knowing full well that there are a lot of unsold homes out there, most would-be buyers are waiting for a sign that prices have stopped falling and thus stabilized before making a bid.
They are waiting because history has conditioned them to do so.
Until recently, home prices used to go in only one direction, up, the only question being how fast. As a result, a house became just about the only item -- large or small -- that people would buy expecting its price to appreciate.
This kind of thinking does not apply to any other product the typical household purchases. Indeed, people routinely buy the latest cell phone, personal digital assistant, high-definition TV, or other electronic gadget fully expecting that those who buy after they do will probably pay less.
But housing is different - at least it used to be. Maybe now that people see that home prices can behave no differently than most other prices (They can go down as well as up), they will adapt a different attitude.
Getting back to affordability, loyal readers know that I believe that this measure is the best way to value a house.
I don't care about the cost of land, labor, building materials or the house next door. What matters to me is the ratio of home prices to household incomes (see my column of Feb. 4).
As of the April stats, the typical existing home cost 3.4 times estimated household incomes, while median new-home prices equaled almost 3.8 times family incomes.
These are down from the peak of 4.2 reached in the bubble year 2005, although they remain above the 2.8 figure that prevailed in the 1980s, when housing sold at a brisk pace.
But home prices don't have to get down to 2.8 times incomes to kick-start the market. A bit over three times might do it.
Remember, incomes are still rising, so home prices don't have to fall as much as you think before buyers decide that they can once more afford the home of their dreams. Sooner or later, the fact that housing is more affordable will sink in. That's when the market will turn.
And, no, my home is not for sale.
Irwin Kellner is chief economist for MarketWatch and for Capital One Bank.
Wednesday, May 7, 2008
Mortgage Applications Rebounding
U.S. MBA's Mortgage Applications Index Rose 15.6% Last Week
By Courtney Schlisserman
May 7 (Bloomberg) -- The number of mortgage applications filed in the U.S. rebounded last week as a drop in mortgage rates boosted buying and refinancing.
The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan rose 15.6 percent to 655.4, from 567 the prior week that marked the lowest level this year. Refinancing increased 19.3 percent and the purchase index rose 12.1 percent.
Mortgage rates have started to fall, reflecting Federal Reserve policy makers' efforts to bring down borrowing costs by pumping more money into the banking system. Stricter lending rules may also be prompting borrowers to file multiple applications to try to qualify for a loan.
``Hopefully, if mortgage rates at least stay in this range, I think that people will start to get a little bit better sentiment regarding housing and whether it is a good time to make purchases,'' Russell Price, a senior economist at H&R Block Financial Advisors in Detroit, said before the report.
The lenders group's refinancing gauge rose to 2,273.8 from 1,905.2. The purchase measure increased to 381.3, from 340.1, the lowest level since February 2003.
Applications to refinance rose to 45.9 percent of all loans, from 45.7 percent a week earlier. The share for adjustable-rate mortgages jumped to 12.6 percent, more than double the previous week's total.
The average rate on a 30-year fixed-rate loan decreased to 5.91 percent from 6.01 percent.
Rates Fall
The average rate on a 15-year fixed mortgage fell to 5.49 percent from 5.53 percent. The rate on a one-year adjustable- rate mortgage declined to 6.77 percent from 6.86 percent.
Other reports suggest the housing downturn, now in its third year, is continuing and filtering through to other parts of the economy. House prices in 20 U.S. metropolitan areas dropped 12.7 percent in February from a year earlier, the most since record-keeping began, S&P/Case-Shiller's home-price index showed last week.
Later today, the National Association of Realtors may report that its pending home sales index fell 1 percent in March, according to the median forecast of economists surveyed by Bloomberg News. Earlier this month, the group said sales of existing homes dropped for a seventh time in eight months.
Home sales have been hurt by lack of demand and by banks' reticence to lend following growing losses. A quarterly Fed survey released May 5 showed the share of banks making it tougher for companies and consumers to borrow approached a record over the last three months.
Bernanke's Plea
Fed Chairman Ben S. Bernanke on May 5 urged the government and mortgage lenders to intensify efforts to avoid home foreclosures. He also reiterated a call for lenders to forgive portions of mortgages for some struggling homeowners and said rising defaults may push home prices down further.
Harvard University economist Martin Feldstein said yesterday the biggest risk to the economy is a sharper downturn in housing. Feldstein is also president of the National Bureau of Economic Research, which houses the committee that charts the American business cycle.
``It's really too early to tell,'' Feldstein said in a Bloomberg Television interview. ``Everything hinges on what's going to happen to house prices,'' and ``therefore the whole credit crunch,'' he said. Home prices will ``come down somewhat more.''
Falling home values leave Americans feeling less wealthy, hurting consumer spending and pushing the economy closer to a recession.
Fed policy makers last week cut the benchmark overnight lending rate between banks by a quarter point, to 2 percent. In text accompanying the announcement of the rate decision, the central bank listed ``the deepening housing contraction'' as one of the measures that is ``likely to weigh on economic growth over the next few quarters.''
Homebuilder D.R. Horton Inc. reported a record loss yesterday and said orders fell 25 percent.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net Last Updated: May 7, 2008 07:00 EDT
By Courtney Schlisserman
May 7 (Bloomberg) -- The number of mortgage applications filed in the U.S. rebounded last week as a drop in mortgage rates boosted buying and refinancing.
The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan rose 15.6 percent to 655.4, from 567 the prior week that marked the lowest level this year. Refinancing increased 19.3 percent and the purchase index rose 12.1 percent.
Mortgage rates have started to fall, reflecting Federal Reserve policy makers' efforts to bring down borrowing costs by pumping more money into the banking system. Stricter lending rules may also be prompting borrowers to file multiple applications to try to qualify for a loan.
``Hopefully, if mortgage rates at least stay in this range, I think that people will start to get a little bit better sentiment regarding housing and whether it is a good time to make purchases,'' Russell Price, a senior economist at H&R Block Financial Advisors in Detroit, said before the report.
The lenders group's refinancing gauge rose to 2,273.8 from 1,905.2. The purchase measure increased to 381.3, from 340.1, the lowest level since February 2003.
Applications to refinance rose to 45.9 percent of all loans, from 45.7 percent a week earlier. The share for adjustable-rate mortgages jumped to 12.6 percent, more than double the previous week's total.
The average rate on a 30-year fixed-rate loan decreased to 5.91 percent from 6.01 percent.
Rates Fall
The average rate on a 15-year fixed mortgage fell to 5.49 percent from 5.53 percent. The rate on a one-year adjustable- rate mortgage declined to 6.77 percent from 6.86 percent.
Other reports suggest the housing downturn, now in its third year, is continuing and filtering through to other parts of the economy. House prices in 20 U.S. metropolitan areas dropped 12.7 percent in February from a year earlier, the most since record-keeping began, S&P/Case-Shiller's home-price index showed last week.
Later today, the National Association of Realtors may report that its pending home sales index fell 1 percent in March, according to the median forecast of economists surveyed by Bloomberg News. Earlier this month, the group said sales of existing homes dropped for a seventh time in eight months.
Home sales have been hurt by lack of demand and by banks' reticence to lend following growing losses. A quarterly Fed survey released May 5 showed the share of banks making it tougher for companies and consumers to borrow approached a record over the last three months.
Bernanke's Plea
Fed Chairman Ben S. Bernanke on May 5 urged the government and mortgage lenders to intensify efforts to avoid home foreclosures. He also reiterated a call for lenders to forgive portions of mortgages for some struggling homeowners and said rising defaults may push home prices down further.
Harvard University economist Martin Feldstein said yesterday the biggest risk to the economy is a sharper downturn in housing. Feldstein is also president of the National Bureau of Economic Research, which houses the committee that charts the American business cycle.
``It's really too early to tell,'' Feldstein said in a Bloomberg Television interview. ``Everything hinges on what's going to happen to house prices,'' and ``therefore the whole credit crunch,'' he said. Home prices will ``come down somewhat more.''
Falling home values leave Americans feeling less wealthy, hurting consumer spending and pushing the economy closer to a recession.
Fed policy makers last week cut the benchmark overnight lending rate between banks by a quarter point, to 2 percent. In text accompanying the announcement of the rate decision, the central bank listed ``the deepening housing contraction'' as one of the measures that is ``likely to weigh on economic growth over the next few quarters.''
Homebuilder D.R. Horton Inc. reported a record loss yesterday and said orders fell 25 percent.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net Last Updated: May 7, 2008 07:00 EDT
Thursday, April 17, 2008
Bargain hunters boost home sales in some markets
http://www.usatoday.com/money/economy/housing/2008-04-16-bargain-hunting-real-estate_N.htm
This article talks about how one creative realtor has been specializing in bank owned properties and taking people on an exciting bus ride to view the dramatically discounted properties.
Sounds like a good idea.
This article talks about how one creative realtor has been specializing in bank owned properties and taking people on an exciting bus ride to view the dramatically discounted properties.
Sounds like a good idea.
Monday, March 17, 2008
Inflation Doesn't Hurt Long Term Investors
It appears that we are going into a period of possible rampant inflation here. If you can ride out the storm, the value of your dollars that you earn from your employment or rents is going to get more and more powerful over time.
People who are looking long term and putting money away for retirement are benefiting in a “bad news” inflationary scenario. To get the compounding effect that long term investors are after, you want to acquire assets at the lowest valuation you can. So lower acquistion costs are good.
Inflation works against the lender not against the borrower.
That mortgage that was worth $100,000 or $200,000 with the value of those dollars is suddenly (say in 10 years) is going to be paid off with dollars that are worth a lot less to you at that time. Ultimately this creates a lot of value for you.
People who are looking long term and putting money away for retirement are benefiting in a “bad news” inflationary scenario. To get the compounding effect that long term investors are after, you want to acquire assets at the lowest valuation you can. So lower acquistion costs are good.
Inflation works against the lender not against the borrower.
That mortgage that was worth $100,000 or $200,000 with the value of those dollars is suddenly (say in 10 years) is going to be paid off with dollars that are worth a lot less to you at that time. Ultimately this creates a lot of value for you.
Friday, March 14, 2008
College Towns: Still a Smart Investment
As the following stories details, Property values in college towns are holding strong and can make a good investment whether you're a parent, an investor, or just looking to relocate.
http://tinyurl.com/2sc7zc
In our area the Towns around Storrs, CT are still good towns to consider for investing in real estate.
This Business Week article has one of those cool slideshows where they look at 25 towns that are home to long–established, top–quality colleges and universities, and they asked New York City–based OnBoard to find out how these real estate markets performed in 2007 vs. 2006.
http://tinyurl.com/2sc7zc
In our area the Towns around Storrs, CT are still good towns to consider for investing in real estate.
This Business Week article has one of those cool slideshows where they look at 25 towns that are home to long–established, top–quality colleges and universities, and they asked New York City–based OnBoard to find out how these real estate markets performed in 2007 vs. 2006.
Monday, March 10, 2008
Union Leader - Avenues - New Hampshire Real Estate
Here is a well written article on the Real Estate Market in the Manchester Union Leader
Union Leader - Avenues - New Hampshire Real Estate
Inside the article there is an interesting paragraph that is well worth pondering:
Today's lower rates also offer a unique opportunity for buyers to significantly increase their net worth. A study completed by the Federal Reserve indicates that the average homeowner's net worth is $171,000, which is nearly 46 times that of a renter's, who has an average net worth of $4,800.
First do we believe this very profound statistic? Absolutely we do. Why is this so profound? The average net worth of a renter is 1/46th that of a home owner.
FORTY-SIX Times! That is a lot of times!
Now let’s use this amazing statistic to ask some further questions. Is it likely that the real estate investor has a greater net worth that the single home owner? Again the answer is yes.
If it is good for your net worth to own a home, then it is probably better for your net worth to own two homes. What about five or ten? Real Estate Investing is usually good for your net worth and if for some reason it is not, then wait awhile and it will be. Holding Real Estate for a long time has a way of healing bad purchases ---- if you can hang on.
One of my tenants in our four family apartment on Spruce Street this week signed a new lease for a $50 increase in the rent. Is that a lot of money? Not enough to cause them to move but what does the $50 increase mean to me. It means I will be receiving $50 more each month……probably for the rest of my life…..and into the lives of my heirs….if they are wise enough to continue to hold on to this real estate. $50 a month for the rest of my life isn’t bad. Sounds like a game show wining or a lottery prize. Now I said this is one of our tenants in our four family apartment. What if I can get this $50 increase from all four of my tenants this year -- as I plan to do? Now I have $200 a month for the rest of my life. This is getting better. Now what if I have fourteen different tenants and I can get $50 from all of them? That is $700/month for the rest of my life. Now this is starting to sound like it could change somebody’s life. Now we fast forward into 2009 and we are able to do it all again now we are talking $1,400 more each month for the rest of my life. And so on. Do you see how holding real estate has a way of curing what ills you?
I noticed one day after buying a house for $150,000 which appraised at $159,000 -- that on the day of the closing my net worth increased by $9,000. It occurred to me on that day….”I should do this more often.”
Net worth is a simple equation: Everything you own …. Minus everything you owe. This is how banks determine your net worth. They add your assets and subtract your liabilities.
Every single time you buy some real estate and it appraises for more than what you paid for it – you just increased your net worth.
This is all very simple stuff but also very profound. It is so simple that most people can’t see it or don’t believe it. But it is true.
Union Leader - Avenues - New Hampshire Real Estate
Inside the article there is an interesting paragraph that is well worth pondering:
Today's lower rates also offer a unique opportunity for buyers to significantly increase their net worth. A study completed by the Federal Reserve indicates that the average homeowner's net worth is $171,000, which is nearly 46 times that of a renter's, who has an average net worth of $4,800.
First do we believe this very profound statistic? Absolutely we do. Why is this so profound? The average net worth of a renter is 1/46th that of a home owner.
FORTY-SIX Times! That is a lot of times!
Now let’s use this amazing statistic to ask some further questions. Is it likely that the real estate investor has a greater net worth that the single home owner? Again the answer is yes.
If it is good for your net worth to own a home, then it is probably better for your net worth to own two homes. What about five or ten? Real Estate Investing is usually good for your net worth and if for some reason it is not, then wait awhile and it will be. Holding Real Estate for a long time has a way of healing bad purchases ---- if you can hang on.
One of my tenants in our four family apartment on Spruce Street this week signed a new lease for a $50 increase in the rent. Is that a lot of money? Not enough to cause them to move but what does the $50 increase mean to me. It means I will be receiving $50 more each month……probably for the rest of my life…..and into the lives of my heirs….if they are wise enough to continue to hold on to this real estate. $50 a month for the rest of my life isn’t bad. Sounds like a game show wining or a lottery prize. Now I said this is one of our tenants in our four family apartment. What if I can get this $50 increase from all four of my tenants this year -- as I plan to do? Now I have $200 a month for the rest of my life. This is getting better. Now what if I have fourteen different tenants and I can get $50 from all of them? That is $700/month for the rest of my life. Now this is starting to sound like it could change somebody’s life. Now we fast forward into 2009 and we are able to do it all again now we are talking $1,400 more each month for the rest of my life. And so on. Do you see how holding real estate has a way of curing what ills you?
I noticed one day after buying a house for $150,000 which appraised at $159,000 -- that on the day of the closing my net worth increased by $9,000. It occurred to me on that day….”I should do this more often.”
Net worth is a simple equation: Everything you own …. Minus everything you owe. This is how banks determine your net worth. They add your assets and subtract your liabilities.
Every single time you buy some real estate and it appraises for more than what you paid for it – you just increased your net worth.
This is all very simple stuff but also very profound. It is so simple that most people can’t see it or don’t believe it. But it is true.
Springfield housing market still strong -- chicagotribune.com
Springfield housing market still strong -- chicagotribune.com
This is a very interesting Map of the United States and housing price appreciation or depreciation. What this map shows is that, unlike what we are hearing in the news media about a universal and widespread real esate meltdown, there is some variety in situations around the country.
Some areas are deflating but these are the areas that in many cases were super white hot just a few years ago. Other areas like Springfield, IL and Binghamton, NY are actually appreciating just as rapidly as the white hot areas were depreciating at the moment.
We conclude that there is not just one "real estate market" but many and they are much more varied in their situations and much more nuianced than the major news media would lead us to believe.
This is a very interesting Map of the United States and housing price appreciation or depreciation. What this map shows is that, unlike what we are hearing in the news media about a universal and widespread real esate meltdown, there is some variety in situations around the country.
Some areas are deflating but these are the areas that in many cases were super white hot just a few years ago. Other areas like Springfield, IL and Binghamton, NY are actually appreciating just as rapidly as the white hot areas were depreciating at the moment.
We conclude that there is not just one "real estate market" but many and they are much more varied in their situations and much more nuianced than the major news media would lead us to believe.
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