To Buy or Not to Buy, that is the question….

I come across this question all of the time, especially in this market. Many people I feel want to take advantage of the market, but they’re just not sure if NOW is the time or not. When is the perfect time to buy? We will only really know that once prices start going back up, then everyone will say “that was the time to do it.” However at that point, it will be too late. The market will have started to recover. There are signs pointing to recovery, but I think there is still a ways to go. Does that mean that buyers should sit back and just wait? I don’t think so. There are too many good incentives to let this market pass you buy.

Will home prices get better? Maybe, but maybe they won’t. If you read my last blog post you could see that home prices in Cincinnati dropped 13% on average when compared to last year. And as I mentioned in that post, as inventory shrinks and more demand is created, prices will start to climb back up. Get the prices now while we KNOW they are low. It’s the law of supply and demand.

Another great incentive are the low mortgage rates we are seeing right now. I don’t think that today’s first time home buyer really appreciates the low rates we’ve got going right now. They will all be in for a shock when they go to sell 5 years from now and may have to pay quite a bit more. Today’s rates, although they fluctuate a lot, they are still historically low, generally between 5-6%. Once everything starts to bounce back you can pretty much kiss these sweet deals good bye…

If you’re a first time home buyer you may want to finally jump on the home buying band wagon. Your 8k tax incentive is up Nov 30, 2009. That means you have to CLOSE by Nov 30. The clock is ticking my friends… who is eligible? Anyone who hasn’t owned a home in the past 3 years if they meet income limits single buyers, $75,000 a year; married couples $150,000. The credit decreases for single buyers earning between $75,000 and $95,000, and between $150,000 and $170,000 for home buyers filing jointly.

Call me today if you have any questions on purchasing a home in Cincinnati! I’d love to help.<-->

We could all use some good news right?  Well Cincinnati, here you go - Home sales are up for the month of June when compared with June of last year.  According to a press release by the Cincinnati Area Board of Realtors ” Realtors sold 1,955 homes last month compared to 1,940 one year earlier. June sales were 16.6% higher than May, which recorded 1,677 sales.”    Paul Jacobs, president of the Cincinnati Area Board of Realtors, cited these three factors to explain the increase in June sales (closings)-  all 3 I tend to agree with and see them as driving factors in my increased business over the past few months…
1) Low home mortgage interest rates - June average was  5.62%. That compares to 6.50% one year ago. It is now 5.51%
2) Buyers realizing that home prices are at bargain levels - Depending on the neighborhood, a lot of homes are going for less than what the owners paid for them just a few years ago.
3) Stronger utilization of the $8,000 first-time home buyer’s tax credit - First time home buyers are feeling the crunch and know that time is of the essence to utilize this by Nov 1, 2009.

Before you go out and celebrate that the housing market is recovering and this is the beginning of the end of our recession - its not all sunshine and flowers out there.   Home prices for Cincinnati, overall, were 13% lower than June 2008.   This once again is very dependent upon the neighborhood.  Many of the areas I work in, haven’t seen that much of a decrease and some haven’t seen any decrease at all.  It depends on the neighborhood and the supply of homes available to the buyers out there.  Our local inventory is also shrinking - which means we are headed to a more ’stable market’ where the supply meets the demand (a balanced market is about 6 months of home sales) .  We moved to a market of about 7.19 months in June. That’s down from 8.47 months a year ago.  (A lower number means greater demand for current inventory.)

Overall, things seem to be starting to move.  At least in the lower price end of homes 100-200 range.  Once this inventory gets eaten up, we should hopefully start to see the higher priced homes move a lot quicker as well.

Here are some June stats for your viewing pleasure (taken directly from the CABR press release):

Previous Month Home Sales Comparison
Closings      Gross Volume      Average Price
June 2009                  1,955         $321,500,105         $164,450
May 2009                    1,677       $260,491,965          $155,332
Variance    +16.58%         +23.42%                   +5.87%
June Monthly Home Sales
Closings      Gross Volume      Average Price
June 2009                 1,955          $321,500,105        $164,450
June 2008                 1,940          $367,382,301       $189,372
Variance     +.77%                 -12.49%                -13.16%
Year-to-Date Home Sales
Closings      Gross Volume      Average Price
Jan-June 2009        8,460       $1,228,397,263       $145,201
Jan-June 2008        9,524        $1,575,957,062      $165,472
Variance    -11.17%               -22.05%                -12.25%

Short Sales are popping up all over the place. Everyone likes trying to get a deal in Real Estate these days.  Don’t get me wrong, there are lots of deals to be had (when you compare todays prices with those 3-4yrs ago).  In fact we are close to 2003-2004 prices!  The most common misconception about short sales, is that they’re short in process. This is far from the truth. Short sales can actually take a VERY long time.  I’ve had clients wait up to 6 months for a home only to find out the bank(s) have rejected their offer.  YIKES! 

If you’re only dealing with 1 bank, the process seems to be a lot faster than if the seller has multiple mortgages and home equity lines out on the property.  All of these banks must agree to a lesser amount than what their owed.   The more banks there are, the more time they take.  However, the good news is banks seem to be getting more realistic about pricing and condition.  I think they see the short sale market growing and they need to move fast.

As for condition of the property? Sometime they’re in good shape, other times they’re not.  It all depends on the homeowner and their financial situation.  They’re usually in better shape than an actually foreclosure.  But no guarantees anywhere.

In short, these sales can be worth a buyers time, if they’ve got it.

It was a week before Christmas and I was as busy as can be. Who says home sales aren’t happening? Sure, things are a little squishy right now - but people are out there and they’re looking.  The problem is, there just isn’t that much out there. 

If you’re looking to sell, you’ve got to:  1. price it right 2. make it look great! 3. Impliment strategic marketing

Questions? Call me!

Here are some stats on November sales:
                                      November Monthly Home Sales
                                 Closings       Gross Volume        Average Price
Nov. 2008            1,168           $168,995,148          $144,688
Nov. 2007            1,593          $261,434,650          $164,115
Variance                -26.68%          -35.36%                    -11.84%

                                                       Year-to-Date Home Sales
                                        Closings         Gross Volume           Average Price
Jan-Nov. 2008           17,469         $2,862,722,303         $163,874
Jan-Nov. 2007          20,906         $3,639,623,639          $174,095
Variance                        -16.44%           -21.35%                          -5.87%

                            30-Year Fixed Rate Mortgage (local)
                               November 2007 (average) 6.44%
                               November 2008 (average) 6.39%
                                    Current (Dec. 22, 2008) 5.08%

Perhaps Most of you saw this news yesterday:

Fannie Mae, Freddie Mac suspend foreclosure sales - Restriction is in place from Nov. 26 to Jan. 9

Is the government wanting to give some holiday cheer to those in need?  Are they feeling the warm fuzz of the holiday’s?  Or are they so swamped that they can’t handle the amount of paperwork that they already have?  Personally, I think its the former and not the latter.  Having worked on a few lender owned or pre-foreclosed (short sale) properties recently, i can tell you that the hole process is ridiculous.  No one bank handles them the same way and it seems as though things are always done backwards and with no consistency.  There should be a stream lined process.  Perhaps thats what they’re working towards?

My other question is what happens now that another 45 days goes by and the banks are now even further behind on getting paid? From experience a majority of home owners who know they’re getting foreclosed upon simply stop taking care of their property.  I’ve even heard of instances where owners will sell EVERYTHING in the house that they can (furnaces, cabinets, copper piping, etc) if they know they’re house is going to be taken away.  Now, its worth even less and the bank (and now the tax payers) is left picking up the pieces…  I’m not saying that every foreclosed property is like this, but 9 times out of 10 thats what I walk into…

Only time will tell.  In the end, it does make me feel warm and fuzzy that people won’t be displaced during the holiday season.  Even though the gloom of Jan 9th will be over their shoulders.

Press Release

Cincinnati Area Board of Realtors®

October 24, 2008

Contact: Karen Schlosser, President, 489-5440 (office), 702-6285 [cell]

Gene Snavley, Executive VP, 543-2211 [cell]

1,637 Homes Sold in September;

Nearly 15,000 Sold First 9 Months

The gap in year over year home sales — comparing the most recent two months — has improved, reports the Cincinnati Area Board of Realtors. Sales in September totaled 1,637, down by 4.4% over the same month a year ago. In August, sales were off 18.8% a year ago. Accordingly, the sales gap last month improved by 14.4%

—– Number of Home Sales Variance —–

August 2008 vs. August 2007: -18.8% (1,767 sales compared to 2,176 a year ago)

September 2008 vs. September 2007: - 4.4% (1,637 sales compared to 1,713 a year ago)

Improvement: 14.4%

The gap in average home sale price also improved. September showed a 4.73% price reduction over the same period a year ago. For August, it was a 6.61% price reduction.

—– Average Sales Price Variance —–

August 2008 vs. August 2007: -6.61% ($165,166 avg. sale price compared to $176,859 a yr. ago)

September 2008 vs. September 2007: -4.73% ($156,639 avg. sale price compared to $164,419 a yr. ago)

Improvement: 1.88%

For the first nine months of the year, 14,796 homes were sold. That compares to 13,144 homes sold through August. “We’re not out of the woods yet,” said Karen Schlosser, president of the Cincinnati Area Board of Realtors. “But buyers are still buying. The numbers prove that – there were 14,796 buyers the first nine months of this year…and 14,796 sellers.” Nationwide, September home sales seasonally adjusted rose 5.5% from August. From a year ago, nationwide sales are up 1.4% and the median sale price of $191,600 declined by 9%. Mortgage rates remain attractive. Locally, a fixed-rate mortgage averaged 6.55% last month. Yesterday it dropped to 6.49%, while earlier in the week it was higher.

September Home Sales

Summary of Single Family and Condominium Sales

Multiple Listing Service of Greater Cincinnati

Cincinnati Area Board of REALTORS®

September Monthly Home Sales

Closings Gross Volume Average Price

Sept. 2008 1,637 $256,418,131 $156,639

Sept. 2007 1,713 $281,650,413 $164,419

Variance -4.4% -8.96% -4.73%

Year-to-Date Home Sales

Closings Gross Volume Average Price

Jan-Sept. 2008 14,796 $2,461,878,015 $166,388

Jan-Sept. 2007 17,571 $3,087,307,553 $175,705

Variance -17.11% -21.44% -5.22%

30-Year Fixed Rate Mortgage (local)

Sept. 2007 (average) 6.55%

Sept. 2008 (average) 6.34%

Current (Oct. 23, 2008) 6.49%

# # #

Interesting to think about isn’t it?  Where will you be living when housing prices start to creep back up?  Will you then think its a good time to buy??  According to some, this is the best opportunity to buy since the 1989-1991 real estate crash.

Sure you think my point of view is skewed a bit and I think everyone should be buying right now!  Well, yes.  However, I’m not the only one.  An article printed in the New Yorker about 1 month ago was brought to my attention last week.  Whether you agree with it or not, its pretty interesting…

Jim Cramer predicts to the day, when the housing market will turnaround; June 30, 2009.  Thats a pretty stick to your guns statement, but he does bring up some valid points on why he thinks this market will make a comeback by next year. 

The most interesting point I found was his statement on the effect of immigration on the housing market.  Evidently, before George W, we could reliably anticipate about 1million illegal immigrants to arrive each year, but that number is much lower now (partly explaining why Florida, California & Arizona have been hit especially hard by excess inventory).  Both presidential candidates are much more immigrant-friendly and once either is elected, we can start to see an influx of new immigrants and home buyers.  I’m not 100% sure on how many illegals were actually purchasing homes, but I’m sure there is a strong correlation between the two, but maybe not a causal relationship.

For those of you on the fence, start to look for small signs that the market is returning in the states that were hit the hardest.  Cramer claims that the absolute worst areas, those with the highest foreclosures, bottomed out this summer.  When there are small signs of life returning in these areas, you know the rest of the country is going to follow.  Here in Cincinnati, we were never hit very hard with the high prices, so we won’t see a dramatic down swing, so it may be less evident.  The longer you wait the more chance you take on missing the boat.  My advice, if you can purchase now, do it.  Go with a nice clean 15 or 20 year FIXED rate mortgage - Rates are in the upper 5’s to lower 6’s.  Its a great time to buy!

The past few weeks has been a rollercoaster ride for everyone.  From the freak windstorm (a.k.a hurricane) we Cincinnatian’s endured to the financial and econoic craziness happening all across the nation.  It sure has put everyone on alert.

We all know that everyone in our government is doing the best they can to avoid anymore economic downturn.  Things are uncertain thats for sure.  People of late have been asking me how business is going and how this economy is changing buyers perspectives?

Well, its coming in at two different directions.  There are some buyers who have completely freaked out and are waiting to see what happens.  They’re on the sidelines, wanting to purchase but are avoiding it for a bit.  The old “wait and see” perspective.

On the other hand, there are many others who are starting to come out of the woodwork knowing that the time is right to purchase.  They’ve got the down ayent and they know that interest rates are low and so are home prices.  Most of them don’t have a home to sell and therefore are willing to take the plunge into home ownership.  I haven’t had many problems getting them financially approved and their homes appraised for at or above the agreed upon purchase price.

They know that real estate has a TAX BENEFIT.  Real Estate is traditionally less volatile than the stock market and it offers superior tax benefits.  Home mortgage interest is deductible on your income taxes if you itemize. You can deduct the interest on up to one million dollars of home mortgage debt, whether it is used to purchase a first or a second home. You can also deduct the interest on up to $100,000 of home equity debt, even if you don’t use the money for home improvements. Real estate taxes are deductible as well. With the availability of these tax deductions, you should consider whether borrowing on a home is right for you.

They know that home prices will eventually rebound.  Housing is a universal need, everyone needs housing and as our population continues to grow, real estate prices will eventually rebound and increase over the long term.  They realize that buying a home is a long term investment. And with interest rates as low as they are, buying a home as an investent makes even more sense.  For example, with a 10 percent down payment and 90 percent loan-to-value mortgage, a 2 percent property appreciation can translate to a return-on-investment of 20 percent annually.  Even if your rate of return is equal to putting your cash into a mutual fund, you are likely to find the tax benefits of owning a home will tip the scale toward real estate.

Buying a home, doesn’t just come with investment and tax benefits. There are personal benefits as well.  You get to enjoy and relax in a home of your own.  Stop the renting and purchase a home.  If you don’t have a down payment, start saving for one.  Home ownership is well worth the wait and in Cincinnati, buying a home has never been better!

The copy below is a recent press release from the Cincinnati Area Board of Realtors.  As one can see, prices continue to show a downward trend.  Nothing new right?  Well the good news is they’re not as depressed in Cincinnati as we are seeing elsewhere around the country.  There are some people who think that if they wait they’ll get a better deal on a house.  I suggest not waiting and that start looking now.  Why you might ask?  Well, interest rates continue to creep up as the home prices drop.  Unless you are planning on buying a home with cash waiting will not save you any money and it may actually cost you more money in the long run.  Start looking now.  You’ll be glad you did.

This just in from the CABR:

Press Release

Cincinnati Area Board of Realtors®

  August 25, 2008

 1,854 Homes Sold in July;

 More Than 11,000 Sold First 7 Months

 Local Realtors sold 1,854 homes in July, and 11,371 the first seven months of the year. 

July sales represented the second best month of the year, relative to last year sales.  Sales were off only 12.26% from 12 months ago.   That’s an improvement over June’s 20.25% sales drop.  Nationwide, July home sales seasonally adjusted were up 3.1% from June, but off 13.2% from a year ago.  With the new $7,500 housing tax credit in place for first-time buyers, that should stimulate sales during the remainder of the year.   Inventory of homes for sales locally stands at 16,689, which represents 9 months of inventory.  That’s down from last July’s 17,880, which is improving news for sellers.  A balanced market – equally good for buyers and sellers – is 5-6 months. The average selling price in Greater Cincinnati last month – at $181,259 – dipped 3.84% from a year ago.  Mortgage rates remain favorable locally, as they have all year.  A conventional, fixed rate loan in July averaged 6.60%.  That compares to 6.56% the same period one year earlier.  It’s now 6.68%     “While sales are off somewhat in the area, it’s a whole lot better than some parts of the nation,” said Karen Schlosser, president of the Cincinnati Area Board of Realtors.   “For the year, we’re off 16.9%.  Sales in parts of Florida, Nevada and California are off over 30%.”   Schlosser said the current housing market is excellent for buyers, due to a good inventory of homes to choose from, favorable prices, and attractive mortgage rates.      

Summary of Single Family and Condominium Sales

July Monthly Home Sales

                   Closings           Gross Volume          Average Price           

July 2008       1,854             $336,054,362              $181,259                

July 2007       2,113             $398,289,853              $188,495        

Variance     -12.26%                  -15.63%                  -3.84%                

Year-to-Date Home Sales

                             Closings           Gross Volume           Average Price          

Jan-July 2008       11,371              $1,911,468,374           $168,100                

Jan-July 2007       13,682              $2,420,812,756           $176,934         

Variance             -16.89%                        -21.04%              -4.99%     

 30-Year Fixed Rate Mortgage (local)

July 2007 (average)                  6.56%

July 2008 (average)                  6.60%

Current (Aug. 18, 2008)           6.68%

Today in our sales meeting a large chunk of our time was spent talking about the housing relief bill that is on the presidents desk waiting to be signed. Our loan officer Kathy Kappes put together a wonderful presentation for us so that we could update all of our current clients on the situation and let future clients know how this may effect them and their future purchases.

Here is a bit of a review as far as the financing aspect is concerned:

The FHA section below lists changes included in the Omnibus Housing Bill passed last Saturday by the U.S. Senate.  President Bush has indicated he will sign the bill this week.  The conventional financing section lists changes impacting current FannieMae and FreddieMac underwriting guidelines.

FHA Financing

• No longer need to wait 90 days to sell a bank-owned property.  Bush administration has announced a “temporary” policy that allows for the immediate sale of vacant foreclosed properties.
• Down payment requirement will increase from 3% to 3.5%.
• Down payment assistance programs (DAP) will be terminated 10/1/08 (i.e, no more AmeriDream or Neimiah).
• Risk-based mortgage insurance moratorium effective 10/1/08 (i.e., everyone will pay same PMI rates regardless of credit score).
• New loan programs to assist distressed homeowners with up to 90% LTV refinance.  Limits will be placed on income and debt to income ratio.
• Nationwide mortgage licensing system established for loan originators.
• Lesser of $7,500 or 10% of purchase price tax credit available to first-time buyers.  Income limits will apply.  Tax credit will be in the form of a 15-year interest only loan.

Conventional Financing

• Chapter 7 bankruptcy–time period to reestablish credit is four years.
• Chapter 13 bankruptcy–time period to reestablish credit is two years if successfully completed.
• For borrowers with more than one bankruptcy filing in the past seven-year period, a five-year elapsed time period is now required.
• Due to the increased incidence of preforeclosure sales, time period to reestablish credit is two years.
• If current residence is pending sale but will not close prior to new transaction, both the current and proposed mortgage payments must be used to qualify the borrower for the new transaction. 
• If current residence is being converted to an investment property, the lender will count 75% of the rental income if there is documented equity of at least 30% in the existing property.  The lender will also require six months reserves for both properties.

What if you’re already facing foreclosure?  How does the bill help you?

The Federal Housing Administration will be authorized to insure up to $300 billion in refinanced mortgages to help borrowers at risk of losing their homes trade unaffordable loans for fixed-rate mortgages backed by the government.  To participate, lenders must agreeto accept roughly 85% of each home’s current value as payment.  Borrowers could then apply for a new loan for up to 90% of the homes value, but must prove their ability to pay the new loan, and py the government a 1.5 % annual insurance fee, as well as a portion of any profits from resale.  When I was listening to talk radio discuss this topic last week, they were saying that roughly 300 thousand homeowners would be helped and people were skeptical because the lenders must agree to do this.

TAX BENEFITS for first time home buyers?  At first I liked the sound of this, then I read a little bit further. On the surface it looks like first time home buyers who purchase a home from April 9, 2008 to July 1, 2009 will be eligible for a tax credit of up to $7,500!  That sounds great right!  Tax credit = free money?? WRONG - read further and its a credit thats to be repaid over 15 years!  YIkes, what kind of great credit is that?  I’m skeptical….

DISCLOSURES - the good news is that this bill is calling for more disclosure and more explination of the terms in mortgage contracts, particularly with the variable-rate mortgages.  This is good news, but will the average consumer really listen??

What are your thoughts?  Do you approve or disapprove of the policy?