Tuesday, September 28, 2010
Top 10 Most Affordable Cities All in Midwest
7:55 am cdt
The latest list ranking most expensive and the most affordable housing markets in the country is
out, and Chicago is not included on it.
Coldwell Banker Real Estate LLC recently released
its Home Listing Report, which found a $1.7 million difference between the nation’s most expensive and most affordable
cities to buy a home.
The report surveyed more than 18,000 four-bedroom, two-bathroom
properties listed on ColdwellBanker.com between February and August of 2010 in close to 300 real estate markets.
The average listing price of the homes was $353,000.
are below.The top 10 most affordable housing markets and their average listing
prices for the same time period:
1. Detroit, Michigan $68,007
2. Grayling, Michigan $84,625
3. Sioux City, Iowa $85,967
4. Cleveland, Ohio $87,240
5. Muncie, Indiana $100,314
6. Norfolk, Nebraska $107,814
7. Kansas City, Missouri $112,449
8. Canton, Ohio $114,325
9. Port Huron, Michigan $116,267
10. Topeka, Kansas $116,343
The most expensive city in Illinois
to buy a house is Deerfield, with an average listing price of $552,918 for Feb. through Aug. 2010. The least expensive:
Rockford, with an average listing price of $174,566.
The top 10 most expensive
housing markets and their average listing price for February through August, 2010:
Newport Beach, California $1,826,348
2. Palo Alto, California $1,479,227
3. Rye, New York $1,325,500
4. San Francisco, California
5. La Jolla, California $1,210,300
Greenwich, Connecticut $1,195,614
7 Wellesley, Massachusetts $1,080,458
8 Pasadena, California $1,043,683
9. Honolulu, Hawaii $1,026,821
10. Santa Barbara, California $1,024,661
Friday, September 24, 2010
Is Housing Still in a Slump?
12:24 pm cdt
From today's Wall Street Journal:
For months, home buyers and
sellers have been stuck in a curious stalemate, with sellers reluctant to lower prices and buyers staying on the sidelines.
New data suggest the standoff eased slightly last month, as sales of existing, or previously owned,
homes rose 7.6% from July's extremely low levels, according to figures released Thursday by the National Association of
But while the housing market may have halted a slide that began in April after
federal home-buyer tax credits expired, it still faces a long recovery, and buyers remain scarce. The August figures were
the lowest for any month since 1997 except for July.
And while the number of unsold
homes fell 0.6% in August to 3.98 million, it would still take 11.6 months at the current sales pace to clear the inventory.
That's the second highest figure since the realtors' group began tracking the data in 1999, behind July's 12.5 months.
"The only way to sell a home in this environment is to drop the price," said John Burns,
a housing consultant based in Irvine, Calif.
The housing numbers have prompted a debate
among economists about how much further prices need to fall to resuscitate sales. Home prices are likely to fall another
2.2% this year, according to the consensus estimate of 114 economists and housing analysts surveyed this month by MacroMarkets
LLC, a provider of hedging products.
The picture varies from region to region. Home prices
in several Florida and Nevada markets are likely to fall at least another 5%, while parts of Texas and Oklahoma could post
modest gains over the next year, said Eric Fox, vice president of statistical and economic modeling at Veros, a real-estate
analytics firm in Santa Ana, Calif.
Nationally, prices in July fell by 0.5% on a seasonally
adjusted basis following a 1.2% decline in June, according to figures this week from the Federal Housing Finance Agency.
The S&P/Case-Shiller home-price index issues its report on July prices next week.
sellers face a difficult decision: get off the market or cut the price. Sonja Brisson decided to get out. After listing her
home for three months, she began interviewing prospective renters on Tuesday. Ms. Brisson, who is moving to live with her
fiancé, will lose money renting her Seattle town home, but said it was better than competing with distressed sales
going for 30% less than what she paid for her property.
Renting the home is "just
a total crapshoot," she said. "Nobody saw this coming, and nobody can see the end of it."
Weak demand in the housing market comes amid other signs that the economy is improving, but at a painfully
slow pace. An index of leading economic indicators, which aims to help predict where the economy is headed, rose 0.3% in
August after increasing 0.1% in July, the Conference Board said Thursday.
Much of the
lingering weakness in demand is linked to sluggish improvement in the job market. Some 465,000 people filed new claims for
jobless benefits last week, up 12,000 from the week before, the Labor Department said Thursday.
jobs, families are still relying on tactics they employed during the recession—such as households doubling up—to
make ends meet. That's pulling down demand for housing and, in turn, prices and construction.
those jobs get created, people who have been doubling up will start moving out of those homes and demand will pick up,"
said Patrick Newport, an IHS Global Insight economist. "As that happens—it's going to happen very slowly—the
glut will start coming down."
The weak economy is just one reason why buyer psychology
remains depressed. The housing market also faces a "shadow inventory" of four to five million potential foreclosures
that have not yet come to market but could put pressure on prices if they do.
do you rush out today to buy something when you think there are going to be millions more for sale soon," said Michael
Feder, chief executive of real-estate data firm Radar Logic Inc. The question, he said, is "how much lower do prices
have to go to attract the buyers?"
Even investors, who have been active over the
past year buying homes at what they believed were big discounts, are pulling back. "They think everything will be cheaper
next year," said Mr. Burns.
As prices fall, more sellers could find themselves in
Patrick Minton's shoes. He's already dropped the price on his Seattle home to $400,000, which is less than what he owes.
He'll already have to pay transaction costs out of pocket.
The home hasn't
received any offers, and he isn't willing to cut the price any more unless his bank agrees to a short sale. Mr. Minton,
a 42-year-old software developer, listed his home in July after getting divorced and said he'd stay if the bank would let
him refinance at current rates. "It's not the bank's fault that the house isn't worth what I paid for it, but unforeseen
things have forced me into this position," he said.
While 11 million borrowers are
underwater, or owe more than their homes are worth, another 2.5 million will join them if prices decline just another 5%,
according to CoreLogic Inc., a real-estate analytics firm.
"They're between a rock
and a hard place," said Glenn Kelman, chief executive of Redfin Corp., a real-estate brokerage that operates in nine
states. "They'd capitulate if the bank would let them."
That is suffocating
the market because those sellers are also would-be buyers. "Right now, we have investors and first-timers in control
of the market, and until that changes, we will never be on the mend," said Mark Hanson, an independent housing analyst
in Menlo Park, Calif.
The housing market will eventually need more buyers like Robert
Gifford, who spent six months with his wife scouring their Beacon Hill neighborhood in southeast Seattle before pulling
the trigger on a sale in July.
When it came time to sell their smaller home this month,
they didn't dawdle. They cut the listing price by around 10% to $334,000, and it quickly went to contract.
"We didn't want to become an involuntary landlord," said the 31-year-old engineer.
Thursday, September 23, 2010
Housing Starts Up in August
Good news for builders. The Washington Business Journal is reporting that builders broke ground on
more homes in August, led by a jump in apartment construction.
8:39 am cdt
Wednesday, September 15, 2010
10 Reasons to Buy a Home Now
10:07 am cdt
The Wall Street Journal today had a great article on 10 reasons to buy a home today. I'm reprinting
the reasons below:
1. You can get a good deal.
Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits
on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have
come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks
home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure,
they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy,
said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller
since then: Down 18%.
2. Mortgages are cheap. You can
get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago
they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage
rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes. You can deduct the mortgage interest from your income taxes.
You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure,
you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be
better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage.
But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls,
build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters,
these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many
years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher
had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said
my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small
sign that said something big.
5. You'll get a better home.
In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money
talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will
rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best
home in the best neighborhood, you're better off buying.
6. It offers some inflation
protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others,
suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable
inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the
recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there
have plummeted of late. That also makes homeownership look a little better by contrast.
7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as
the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will
head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own
in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part
of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.
8. It's forced savings. If you can rent an apartment for $2,000 month
instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of
people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to
principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good
9. There is a lot to choose from. There is
a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million
homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More
keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice,
as well as great prices.
10. Sooner or later, the market will clear.
Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years.
That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of
the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already
happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments
that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in
a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply
in your town.
Monday, September 13, 2010
3:14 pm cdt
I was recently asked to put together a presentation for a group of professionals
on buying foreclosed properties. I thought it was informative so I am reprinting it here:
WHAT TO KNOW WHEN BUYING A FORECLOSURE
Market conditions have caused an influx of foreclosures to hit the real estate market. The price may be right, but you
must be careful for pitfalls when dealing with these types of properties, and know what to expect going into the transaction.
These are NOT typical real estate deals.
1) Make sure your Contract is accurately dated when submitted to the Bank.
The Bank will take several days, maybe even weeks to respond to your offer. Then, before signing off on your offer,
besides perhaps negotiating or giving you a counteroffer, they will give you a multiple-page Addendum to review and sign.
Make sure your Contract’s closing and mortgage dates are padded to allow for this. Any changes to the Contract after
it is signed must be done by Addendum, and the process is tedious and time-consuming.
2) Have an attorney review the Addendum from
the Bank before signing and attend Closing with you.
Some Addendums require that the Buyer of a foreclosed property pay both Buyer and Seller’s side of transfer taxes,
among other things which will be discussed later in this document. I have also encountered gross misrepresentation within
the listings on these properties, so have an attorney double check things like deeded parking, roof rights, etc. Also have
your attorney check the assessment and/or real estate tax amounts.
3) Have a good home inspection. And make sure you do a final walkthrough prior to
Closing to make sure the property is in the same condition as the time of Contract.
A home inspection is more important than ever on these types of properties. The Seller Bank will not make any representations,
nor will they be liable for any issues with the property. You will sign many documents stating and restating that the purchase
is as-is. You are responsible for doing your own due diligence for the purchase. You may be responsible for having utilities
turned on, or having the property winterized. You will also likely be responsible for the fulfillment of any village inspection
4) Be prepared for delays, roadblocks and problems.
If you are buying this property using a lender, inevitably there are issues to be encountered. Title issues, property
condition issues and condominium association financial issues are just a few. Have your attorney also check for tenant rights
and rights of redemption.
5) There are financial differences.
You will not get the typical 105 or 110% tax proration credit at closing. It will be 100%. Additionally, if you are
buying a condo, pursuant to Illinois statute, you may as a purchaser be responsible for up to six months’ worth of past
due assessments prior to the time the bank took the property over in foreclosure. This can add up, especially if you are also
paying Seller’s transfer stamps! You will also be charged anywhere from $50-$200 per day for every day that you don’t
close past your Contract closing date if it is your lender’s delay. Make sure your lender is aware of your closing date
and will be ready to close on time.
6) Closing these properties is different.
You may not be closed for up to 72 hours after you sign your documents. The documents may need lender approval which
may not happen right away. As a result, you may not have possession of the property immediately, so do not schedule movers
or appointments for the day of closing. Also, make sure you change the locks! You do not know who may still have keys or access
to the property. Be prepared to sit at the closing table with no representation from the Seller Bank. Their attorneys very
rarely show up to closing and pre-send and pre-sign documents.
Wednesday, September 1, 2010
Can You Refinance?
12:42 pm cdt
Terry Savage of the Sun-Times just had a great article on the ins and outs of refinancing. Rates
are at record lows, but what's the criteria?
To refinance your mortgage, you need to meet
three basic criteria:
Good credit -- If your credit
score has dropped below 720, you might be turned down for a loan -- or you could be forced to pay a higher rate. Your lender
should check your credit score at no cost, or you can pay $15.95 at www.myFICO.com.
in your home -- Falling home prices could have wiped out your initial down payment or any home
equity. Before you pay for an appraisal or application fee, make sure your lender runs a free "automated valuations
model" on your property, checking comparable properties in your neighborhood. Then, pay for an appraisal if your lender
is reasonably confident that you have at least 20 percent equity in your home to qualify for the refi.
Income -- Even if you have good credit and equity in your home, you still
might not qualify if you or your spouse is unemployed. Just keeping current on all your bills to maintain your credit rating
isn't enough. You'll have to prove your earnings history for the past two years.
Which new mortgage?
Most people blindly refinance into another 30-year,
fixed-rate mortgage. You can use the calculators at Bankrate.com to see how much you'll save on monthly payments
at lower rates.
If you're younger, still working and need the break on monthly payments,
then stick with that 30-year deal. But if you've been paying on your existing loan for a while and are getting closer to
retirement, you might want to consider a 15-year loan. The rate will be about a half a percent less than on a 30-year loan,
but, because of the shorter pay-out time, a 15-year loan often doesn't lower your monthly payment, and it could even increase
it. Still, you'll have the security of a fully paid home when you retire. Or you can always take the 30-year loan and make
extra principal payments every month.
No matter what the term of the loan, make sure that
it's a fixed rate. Don't fall for any adjustable-rate loans -- even with a very low interest rate -- because those
will have to be refinanced again down the road. If all this money-creation leads to inflation in the future, rates will
move much higher. If instead, rates move even lower, you can always refinance again.
Cost to refi and dangers
It's not just the quoted mortgage rate you
want to consider. It's the annual percentage rate, or APR, that takes fees and costs into consideration. For example, a
lender might quote a mortgage rate but then charge additional "points" (each point is 1 percent of the loan amount)
and fees for arranging the deal. So focus on the APR, which takes those costs into account. The quoted rate and the APR should
be within a quarter point.
Also, be aware that if your loan is a jumbo loan (above the
$417,000 limit for loans insured by Fannie Mae and Freddie Mac), you will likely pay a higher rate.
And be sure to ask about the total monthly payment. You might be required to put property taxes
and insurance costs into escrow as part of the deal, which could increase your monthly bill.
Where to find your mortgage
There are two ways to get a mortgage --
directly from the lender or through a mortgage broker. Either way, you'll have to supply a lot of documents to prove your
income and submit to extensive credit checks, as well as an appraisal of the property.
after this process called "underwriting," you'll be given a "lock" on a rate for probably no longer than
30 days, during which you have to close on the deal. (If rates drop further after you lock in a rate, some lenders offer
the option to "float-down" for free.)
Online matching services, such as QuickenLoans.com
and LendingTree.com, allow lenders to compete for your loan deal. But you'll have to sort through those that contact
you with offers.
To find a mortgage broker, you can use GuaranteedRate.com or
AmericanStreet.com, or you can Google mortgage lenders in your area. But be sure to read the consumer reviews for
that company on Yelp.com or Google, or check the Better Business Bureau. This is too important a transaction to
trust to blind luck or rate advertisements. And that's the Savage Truth.