Real Estate Market Bulletin Blog

The real estate market of today is an amalgamation of foreclosures, bank owned homes, and distressed sellers.  These circumstances have lead to unbelievable deals financially for those willing to make a quick decision and a commitment.  The market as it is now is inefficient and lacking order.  People who are buying are often seeking bargains meaning they’ll either pounce on the first and best deal they see out there, or they’re willing to wait a few months before swooping in for the purchase in a short sale process.  And still others prefer to take part in a chaotic bidding war for a bank-owned house being auctioned.  This leaves little room for the traditional, more relaxed methods of buying a house.  Buying houses on a whim is not everyone’s style however. 

There are several aspects artificially limiting the supply of residential property and at least temporarily bringing the housing market back to a more orderly, less chaotic fashion.  Some of these aspects include:

– Borrowers filing lawsuits and bankruptcies

 

Perhaps in response to these aspects, and perhaps not there has been a slowing of declining home prices and an increase in sales recently.  On top of that, interest rates on 30-year fixed loans remain extremely low.  And although unemployment is still increasing, median income appears to remain unchanged across the nation.

Overall, it is expected that market value of homes will continue to decline, but at a slower pace.  For the foreseeable future, the markets will be mixed, troubled and unpredictable.  In other words, don’t expect the current status quo to go away anytime soon.

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You won’t find Miami, Phoenix, or any of the wounded Californian towns on this list of the most promising real estate markets for the upcoming year.  Money Magazine claims that despite a poor real estate market and the housing crisis certain markets are expected to show price gains in the following months and years.  These cities and towns have been virtually uninjured by the economy, seemingly immune to the foreclosures that have plagued the rest of the nation.

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The Real Estate Market may be well on its way to recovery, however standing in its way are still escalating job losses and lack-luster consumer confidence.  In response to this, some realtors are catching on and offering “protection packages” similar to what Ford and Saturn and other car dealers have been offering on their commercials.

As an example, “Long & Foster Real Estate” is offering a job loss protection program for home buyers.  The sellers of the home will purchase the plan for a flat fee of $500 and offer the protection to buyers.  If buyers lose their jobs within the first two years after their purchase, the protection plan will pay up to $1,800 a month toward mortgage payments for six months.“People are afraid if they buy a house, they will get a pink slip the next day,” said Scott Shaheen, a Richmond regional vice president for Long & Foster, “This protection program takes out the fear level.”

Similar to what Long & Foster Real Estate is offering, LifeStyle Builders and Developers Inc., is offering up to $1,500 a month toward the mortgage, at no cost to homebuyers should they find themselves without a job.

Whether or not this is what the Real Estate market needs to jumpstart it and turn the past months of downturn to an upturn we will see, but it certainly can’t hurt.

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About half of all homes sold last month were sold to first-time homeowners that however has not made up for an overall sub-par spring selling season.  The median price for a house in the month of March was $175,200, down 12% from the previous year.  Typically house prices rise in the Spring season however as was expected, prices are historically low in comparison with previous years.  The good news is that house prices are up 4% from February especially in the western states, the region of the US most effected by foreclosures and the economic slump.

Leading this surge in first-time homeowners purchasing houses this spring may be a new initiative for first-time home buyers where upon purchase they can receive an $8,000 tax credit.  Hopefully this recent surge in first-time home owners will last through the summer, boosting some much needed action and money into the housing market.

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As the Dow slowly but steadily increased over the past month there was talk of a turn-around in the real estate market. And although the market overall and the residential real estate market potentially may be on its way up, there’s still one market that has not been showing much promise, the commercial real estate market.

In a report issued by Ben Bernanke on April 15th entitled “The Beige Book” the fed says,

“Nonresidential real estate conditions continued to deteriorate over the past six weeks. Demand for office, industrial and retail space continued to fall, and there were reports of increases in sublease space. Rental concessions were rising. Property values moved lower”

As a testament to the quote just last week General Growth Properties the second largest mall owner in America owning over 200 properites decalred bankruptcy after reporting it was in $27 billion of debt.  To add fuel to the fire some are estimating that the default rates on commercial loans could go as high as 6.0%.  Other hotel companies such at Starwood Hotels & Resorts are expected to post losses in the upcoming months.  Only time will tell whether or not the commercial real estate market will turn around before we see more bankruptcies within the industry.

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Amidst the current recession hitting the United States few are finding financial opportunity, those who are however are finding it in the real estate sector. A surprising phenomenon has been happening in the past 6 - 12 months, Chinese investors have been investing heavily in the sub-par American real estate market. “The real estate prices in America have gone down drastically,” said Yin Guohua, a partner in a law firm who recently returned from an 11-day U.S. tour with a group of Chinese elite. “It’s a good option for Chinese people who want to buy for investment.”
Chinese real estate tours within the United States are on the rise and many are hoping that the Chinese investment in US real estate will aid the otherwise stagnant and failing real estate market. The thought being any money flowing into the real estate market no matter where it comes from is ultimately good and will hopefully spark others to re-gain their confidence.

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Trying to afford your dream home?  Well a “Green” mortgage may be the answer to the financial problems mortgages traditionally posed to many homeowners and home buyers.  A “green” mortgage or an energy efficient mortgage allows those seeking mortgages to take out a larger amount than they would normally be qualified for in exchange for a promise to either upgrade existing home fixtures, heating and cooling systems, or appliances with more energy-efficient ones or purchasing an already energy-efficient home.

Since mortgage interest payments are tax deductible a green mortgage can be more financially efficient than using a credit card, or a traditional loan in upgrading your appliances since those options offer little to no tax benefits.

It may sound great, however green mortgages aren’t easy to find or qualify for:

“There are two ways a home can qualify for a green mortgage. For existing homes, you’ll need energy-saving improvements verified by a Home Energy Rating System, or HERS, report, following an inspection by a certified home energy rater. To find one in your area, go to the Web site of the Residential Energy Services Network, click on “Home Energy Ratings,” and then select “Find a Certified Rater.” For new construction, a builder must certify that home meets energy-efficiency guidelines.” -Residential Energy Services

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Not since the Great Depression have prices for commercial properties and homes dropped so much.  Falling house prices have been the source of much consternation in the past several months for homeowners, speculators, and the economy in general.  However the new low prices have found a market, especially in regards to distressed properties.  As of recently co-op and condo sales have actually began to rise and its estimated that roughly half of these have been from distressed properites (ie. Foreclosures).

     Although the overall housing market isn’t expected to take a turn for the better until at the best next year, investors who can come up with long term sources of money are purchasing the properties and often renting them out.  Companies such as Angel Acquisition Corp. purchases, renovates and then sells distressed residential properties are banking on the prospect that the real estate market has reachest the lowest it will go and are hoping for a recovery in the housing market soon to reap great profits.

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Government statistics and public markets indicated continued progress on the credit situation even before today’s market rally bega.  Much of this admittedly is not being felt by the general public.  However, excess reserves in banks (see Reuters release and the Federal Reserve ) seems to have peaked with reserves down from $843 billion in the 1st week of January to just over $600 billion March 5, 2009, continuing a downward trend that started at the opening of the year. 

Cash is starting to move out of the banking system.  Much of it is going into precious metals, and the effective printing of money by the Fed announced last week won’t help that.  However, gold prices will peak if the current rally in treasuries and equities continues.  If that happens, look for cash to start flowing into other assets classes by the summer, including possibly housing.  An early sign of this was today’s 5% month on month increase in housing sales.

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     With more and more American homeowners facing foreclosure everyday (although that figure may be declining) many homeowners are turning to an alternative source of credit in an effort to save their homes.  A reverse mortgage, although it’s been around for quite some time has been gaining in popularity in the past several months due to a variety of factors. 

     Traditional mortgages can be tricky for retirees to attain however reverse mortgages generally don’t take into account information such as income or credit history instead taking into account factors such as the home’s value, applicant’s age and any existing mortgages.  These elements have accounted for a roughly 6.4% increase in the number of reverse mortgages in the past year helping many especially older aged Americans avoid bankruptcy and payment delinquencies.

     Reverse mortgages don’t come without drawbacks though, they often have higher fees and total costs can average between $7,000 and $20,000 adding a considerable amount to the loan.  These fees can include a pricey origination fee and typically an upfront insurance premium equal to 2% of the home’s value.

    Ultimately a reverse mortgage could be a solution to your foreclosure problem, however experts and analysts agree it’s best to look at other methods including refinancing, 2nd mortgages, etc. before jumping into a reverse mortgage.

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