More Buyers Ready to Get Off the Sidelines?

When you compare the cost of owning a home to renting, you’ll find that buying may soon make more sense, Paul Diggle, a housing economist at Capital Economics, told MSNBC.com.

Diggle’s analysis of the housing market showed a 33 percent drop in home prices, record-low mortgage rates (with 30-year fixed-rate mortgages available under 4 percent now), and a 15 percent rise in rents since the housing market turned sour are making more consumers take a closer look at buying.

“The median monthly mortgage payment of about $700 has fallen to about the level of a median monthly rent check,” an article at MSNBC.com notes about Diggle’s analysis. “If mortgage rates keep falling and rents keep rising, the equation will tip even further toward owning.”

Case in point: Diggle says that a buyer who purchases a median-priced home and stays there for at least seven years would likely come out ahead by about $9,000 than if they chose to rent for those seven years. Diggle’s calculations factor in rents continuing to rise 3 percent a year, and housing prices staying flat for the next two years before rising in 2014.

But while more Americans may be motivated to buy, many still can’t, Diggle notes. Home owners who lost their home to foreclosure may be forced to wait on the sidelines before owning again, other Americans may not have a 20 percent down payment that more lenders are wanting, lack a high credit score to qualify for the best financing, or have steady employment.

Source: “Home Buying Could Soon Beat Renting,” MSNBC.com (Jan. 23, 2012)

The Suburban Solution

There’s a certain romanticism attached to living in urban locales, as well as the great rural expanses and even isolated small towns of America.

There is no comparable sentimentality attached to the suburbs, even though a 2009 study by the Pew Research Center shows suburbanites are the most content of all home owners. In fact, there is a long intellectual and literary bias against the suburbs.

They’ve often been perceived as a cultural wasteland inhabited by a particularly venal species of Americans who drank too much, philandered, and saw their life forces oozing away. The intellectual assault began with the development of the first modern suburb in America: Levittown, N.Y., which was constructed in the late 1940s to compensate for the housing shortage after World War II.

When the war ended, hundreds of thousands of servicemen and women—many newly married with children on the way—had no place to live but with parents. Enter William Levitt, who devised a way to apply industrial mass-production techniques to the housing problem. Levitt created the first housing development, clearing old potato fields and building thousands of homes in one massive project.

Almost immediately, and for the next 20 years, Levittown was the most reviled community in America. It was attacked by the intellectual left and right. The upper-crust right hated Levittown for many reasons: snobbery, lowering of aesthetic standards, and simply because the suburbs got in the way when they traveled from Manhattan to their country properties in the far reaches of Long Island. The left associated Levittown with 1950s-style conformity, meaning you would end up like everyone else around you.

I wrote a book about the place, Growing Up Levittown: In A Time of Conformity, Controversy and Cultural Crisis (Dancing Traveller Media, 2011), because I was raised there, and it was a terrific place to grow up. My family moved there in 1954. I started kindergarten in the Island Trees school system and stayed until I graduated from high school in 1967.

Decades later, people in suburbs nationwide feel about their towns the way I felt about Levittown. According to Pew Research, 42 percent of suburban residents give the place they live high marks in regard to employment opportunities, cost of living, and a place to raise children, recreational and cultural activities, shopping, and the chance to make friends.

Critics today issue many of the same complaints that were leveled against Levittown when it was built. But some of their arguments are specific to our times: Suburban living wastes gas and other energy resources because of the long commutes and oversized homes.

For the past three decades, however, many companies, big and small, have followed the population growth into the suburbs. Consequently, commutes are often shorter because so many Americans who live in the suburbs also work there. And the sizes of the homes are the result of consumer demand.

Getting home building back on track still means suburban development. More than half of all Americans live in the suburbs, and the health of these communities are crucial for the future well-being of residential life in the United States. However, home builders need to be more conscientious than before the economic bubble burst. For instance, walk ability and smaller footprints are increasingly important qualities for new suburban developments. Also, not every U.S. metro area can handle major new development in the near future because of foreclosure gluts or lack of growth. Home builders need to target tomorrow’s growth metros—such as Charlotte and Raleigh, N.C.; Austin, Texas; Salt Lake City; and Oklahoma City.
Levittown was the right place and the right time. Who knows? Maybe Edmunds, Okla., or Round Rock, Texas, are the next right places at the right time.

By Steve Bergsman

Learn Why Home Ownership Tax Benefits Must Be Preserved

Any changes to the mortgage interest deduction now or in the future could threaten recent progress toward stabilizing the housing market, critically erode home prices and values, destroy middle-class wealth accumulation and hurt economic growth.

That was the message delivered by National Association of REALTORS® NAR Chief Economist Lawrence Yun during today’s Rethinking the Mortgage Interest Deduction forum, where he joined a panel of experts to debate the future of the MID. The event was hosted by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institute, and the Reason Foundation.

“As the leading advocate for housing and home ownership, NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,” said Yun. “The MID facilitates home ownership by reducing the carrying costs of owning a home, and it makes a real difference to hard-working middle-class families.”

Yun argued that now is the worst possible time to discuss changing the tax laws, which could further impair the housing market’s fragile recovery and a broader job market recovery.

“One thing that is indisputable is that eliminating the MID will lower the home ownership rate in the U.S.,” he said. “While we must ensure that the conditions that led to the artificially inflated home ownership rate of the bubble years do not resurface, we also need to create the conditions for sustainable home ownership, which has been shown to provide myriad social benefits for families and communities.”

During the debate, Yun challenged recent proposals calling for changes to the tax code, stating that it’s a misplaced argument to say the MID was a cause of the housing market bubble and is suddenly part of the deficit problem, when it’s been part of the federal tax code for more than 100 years.

Reducing or eliminating the MID is a de facto tax increase on home owners, who already pay 80 to 90 percent of U.S. federal income tax. Yun said the share could rise to 95 percent if the MID is eliminated.

“Doing away with the MID shouldn’t be thought of as removing a tax break for home owners, but rather increasing taxes on the middle class,” he said. “Furthermore, housing equity has been a major source of funds for small businesses, and any change to the MID will greatly hamper their ability to create jobs.”

Yun also asserted that it’s a misconception that only the wealthy benefit from the MID, when in reality it benefits primarily middle- and lower income families. Almost two-thirds of those who claim the MID are middle-income earners and 91 percent of people who claim the MID earn less than $200,000 per year.

Mortgages barely fall; is a rise next?

Mortgage rates barely changed this week as the Fed announced that it plans to keep its benchmark interest rate near zero, hoping to contribute to an economic recovery.

Find the best mortgage rates in your area. The benchmark 30-year fixed-rate mortgage fell 5 basis points this week, to 4.66 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.47 discount and origination points. One year ago, the mortgage index was 4.81 percent; four weeks ago, it was 4.75 percent.

The benchmark 15-year fixed-rate mortgage fell 3 basis points, to 3.83 percent. The benchmark 5/1 adjustable-rate mortgage fell 4 basis points, to 3.36 percent. The 30-year, fixed-rate jumbo mortgage was the exception; its benchmark rate rose 3 basis points, to 5.23 percent.

While the Fed's announcement can be seen as good news for the mortgage market, it is not a guarantee that mortgage rates will remain low.

Weekly national mortgage survey

Results of Bankrate.com's June 22, 2011, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

What would the monthly payment be for you? Use Bankrate's mortgage calculator to find out.

Some mortgage experts, such as Cameron Findlay, chief economist at LendingTree, expect rates to rise over the next couple of weeks.

"If you look at the month of May through the middle of June, equities were declining, bond prices were rising and yields were falling," he says. "There was a flight to quality into (mortgage) bonds. That was helping mortgage rates. But now equities have started to rise and we are seeing a retracement."

End of 'QE2'

Another factor that might put some upward pressure on mortgage rates in coming weeks is the end of the Fed's $600 billion bond-buying program. The second round of the quantitative easing program, known as "QE2," started last year and is scheduled to end June 30.

As expected, the Fed's rate-setting Federal Open Market Committee said Wednesday that it will complete the purchases of long-term Treasury securities by the end of the month and gave no indication that a "QE3" will take place.

Some mortgage analysts say the end of "QE2" will have little to no impact on mortgage rates because the move had been expected and has already been factored into the market. Also, the central bank says it will continue to reinvest principal payments from the securities as they mature.
Findlay isn't as optimistic and believes rates will be affected.

Higher rates not necessarily bad

"Without that synthetic support (from the Fed), rates will naturally rise," he says. "And that's not a bad thing. It's time to let the market find its own equilibrium."

Obviously, potential borrowers don't welcome higher mortgage rates, but rising rates are not necessarily a bad economic sign, says Findlay.

"A rising-rate environment implies there are other positive things happening," he says. "It implies there is some price stability in home values."

Job market weaker than anticipated

However, until there is significant improvement in the job market, the risk of further declines in home values is not going to go away, he says.

In May, the unemployment rate rose to 9.1 percent from 9 percent and the average length of unemployment is now about 40 weeks.

On Wednesday, the Federal Open Market Committee issued a statement acknowledging "recent labor market indicators have been weaker than anticipated," and while economic recovery continues at a moderate pace, it is "somewhat more slowly than the Committee had expected."

The Fed's statement was in line with what investors expected, says Dan Green of Waterstone Mortgage in Cincinnati.

"The Fed does a terrific job in telling you what they are going to say before (they make the announcement)," Green says. "The markets saw exactly what they expected to see."

Green agrees with Findlay that rates may rise slightly in the next coming days as the markets go through a small "correction" but the increase won't be sustained for long, he says.

"It won't last more than a few days," he says.

More Americans Confident About Home Ownership

Americans are more confident about the stability of home prices than they were at the beginning of 2010, according to Fannie Mae's latest national housing survey, conducted between October 2010 and December 2010... And when it comes to home ownership, younger Americans are particularly optimistic, the survey finds.

Nearly 80 percent of all respondents, including home owners and renters, surveyed said they thought housing prices would hold steady or increase over the next 12 months--which is up from 73 percent in January 2010. In fact, survey respondents expressed more confidence over the stability of home prices than they did about the overall strength of the economy. Sixty-one percent said the economy is heading on the wrong track.

Young Americans, Hispanics, and African-Americans were the most positive about their views on home ownership among the general population, according to the survey. Nearly 60 percent of Generation Y respondents (those between 18-34 years old) say that buying a home offers a lot of potential as an investment. Also, more than one-third of Hispanics and African Americans say they plan to buy a home within the next three years, compared to one in four of the general population.

“We are also seeing encouraging signs in the positive attitudes toward home ownership among younger Americans, despite the severe impact of the housing crisis on Generation Y,” says Doug Duncan, Fannie Mae’s chief economist. “But most respondents to our survey continue to lack confidence in the strength of the economic recovery, and they are less optimistic about their ability to buy a home in the years ahead. This sense of uncertainty is weighing on the housing recovery today and reshaping expectations for housing for the future.”

Metro Home Areas See Home Prices Stabilize

Home sales rebounded in 49 states during the fourth quarter with 78 markets – just over half of the available metropolitan areas – experiencing price gains from a year ago, while most of the rest saw price weakness, according to the latest survey by the National Association of REALTORS®.

Total state existing-home sales, including single-family and condo, jumped 15.4 percent to a seasonally adjusted annual rate of 4.8 million in the fourth quarter from 4.16 million in the third quarter, but were 19.5 percent below a surge to an unsustainable cyclical peak of 5.97 million in the fourth quarter of 2009, which was driven by the initial deadline for the first-time buyer tax credit.

In the fourth quarter, the median existing single-family home price rose in 78 out of 152 metropolitan statistical areas (MSAs) from the fourth quarter of 2009, including 10 with double-digit increases; three were unchanged and 71 areas had price declines. In the fourth quarter of 2009 a total of 67 MSAs experienced annual price gains.

The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009. The median is where half sold for more and half sold for less. Distressed homes, typically sold at discount of 10 to 15 percent, accounted for 34 percent of fourth quarter sales, little changed from 32 percent a year earlier.

Lawrence Yun, NAR chief economist, is encouraged by the trend. “Home sales clearly recovered in the latter part of 2010 and are helping to absorb the inventory, including many distressed properties. Even with foreclosures continuing to enter the inventory pipeline, they’ve been selling well and housing supplies have trended down,” he said. “A recovery to normalcy requires steady trimming of the inventories.”

Yun added, “An improving housing market and job growth will go hand in hand. The housing recovery will mean faster job growth.” He projects about 150,000 to 200,000 jobs will be added to the economy this year from an anticipated 300,000 additional home sales in 2011.

Yun further noted, “Better than expected sales and/or strengthening in home values can have an even bigger job impact as consumer spending would naturally rise from a housing wealth recovery affecting a vast number of American families.”

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said a very favorable affordability environment is a huge factor in the recovery. “Although job growth has been relatively modest and credit is tight, you can’t underestimate the impact of historically high housing affordability conditions,” he said.

“Mortgage interest rates recently hit record lows, median family income has edged up and prices in most areas have been stable following the correction from the housing boom. For people with good credit and long term plans, it’s hard to imagine a better opportunity than what we see today,” Phipps said. “Unfortunately the flow of credit is unnecessarily tight and is constraining the pace of the housing and job growth recoveries.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was a record low 4.41 percent in the fourth quarter, down from 4.45 percent in the third quarter; it was 4.92 percent in the third quarter of 2009.

“The healthier local housing markets are also experiencing favorable local employment conditions,” Yun said. Job growth is a major factor in price appreciation in metro areas such as the Washington, D.C., region, where the median existing single-family home price of $331,100 in the fourth quarter is 8.1 percent higher than a year ago; the Boston-Cambridge-Quincy area, at $346,300, up 4.2 percent; and Austin-Round Rock, Texas, at $190,300, up 4.1 percent.

Smaller metro areas sometimes see larger swings in price measurement depending on the types of properties that are sold in a given period. In such markets, full year price data can provide additional context.

In the condo sector, metro area condominium and cooperative prices – covering changes in 57 metro areas – showed the national median existing-condo price was $164,200 in the fourth quarter, which is 6.4 percent below the fourth quarter of 2009.

Twenty-two metros showed increases in the median condo price from a year ago and 35 areas had declines; only 11 metros saw annual price gains in fourth quarter of 2009. “Consumers in the hard hit regions of Nevada, Arizona and Florida were able to scoop up condos at absolute bargain basement prices,” Yun said. Median condo/co-op prices in affected metro areas include Las Vegas-Paradise at $60,700, Phoenix-Mesa-Scottsdale with a fourth quarter median of $68,900, and Miami-Fort Lauderdale-Miami Beach at $81,900.

Regionally, the median existing single-family home price in the Northeast increased 2.3 percent to $240,400 in the fourth quarter from a year earlier. Existing-home sales in the Northeast rose 15.0 percent in the fourth quarter to a level of 797,000 but are 22.8 percent below the surge in the fourth quarter of 2009.

In the Midwest, the median existing single-family home price rose 0.5 percent to $139,200 in the fourth quarter from the same period in 2009. Existing-home sales in the Midwest jumped 18.3 percent in the fourth quarter to a pace of 1.02 million but are 25.4 percent below the cyclical peak one year ago.

In the South, the median existing single-family home price edged up 0.3 percent to $152,400 in the fourth quarter from the fourth quarter of 2009. Existing-home sales in the region rose 11.4 percent in the fourth quarter to an annual rate of 1.82 million but remain 17.8 percent below the surge in the fourth quarter of last year.

The median existing single-family home price in the West declined 2.9 percent to $214,400 in the fourth quarter from a year ago. Existing-home sales in the West jumped 19.9 percent in the fourth quarter to a level of 1.17 million but are 14.2 percent below the cyclical peak in the fourth quarter of 2009.

“A good portion of the sales activity in the West has been driven by investors taking advantage of discounted foreclosures, with high levels of all-cash transactions,” Yun explained.

Daily Real Estate News | February 10, 2011 |Source: NAR

What Qualifies as a Short Sale Hardship?

Sellers aren’t entitled to a short sale just because they’ve lost equity in their home. Lenders look for other hardships when approving short sale transactions. Lisa Udy, a real estate professional with Logan Real Estate in Utah, notes in a recent article the following hardships often qualify:

• Job loss
• Illness
• Divorce
• Death of spouse
• Natural disasters
• Bankruptcy

However, besides a hardship, lenders also consider whether the home’s value has dropped, the mortgage is near or in default (you don’t have to default to qualify but you must prove that if something isn’t done soon, you will default, Udy notes), and the seller has no other assets. What doesn’t qualify as a hardship? Udy says:

• Bad purchase decision or over-bought on the home
• Unhappy with location
• Purchased another home
• Pregnancy
• Walk away
• Home value declined

Source: “Short Sale Hardships -- Qualifying for a Short Sale,” Tempe Real Estate Agent (Jan. 4, 2011)

Creative Ideas for Winter Curb Appeal

Yes, it's still possible to create great curb appeal when it's cold and gray outside.

During summer months when gardens are in bloom and the sun is shining bright, curb appeal comes naturally to many homes. But when the autumn chill turns to winter cold and the sun sets earlier in the day, it becomes more difficult to create that inviting exterior look that grabs buyers from the curb.

Fortunately, it is possible to create striking winter curb appeal without expensive or complicated exterior changes, says Charlene Storozuk, a home stager and designer with Dezigner Digz in Burlington, Ontario—a city that averages 51 inches of snow per year. It just requires a little creativity.

1. Add splashes of green and purple. Plants, grasses, and evergreens can liven up a home’s winter landscape. Experiment with tall grasses, such as fountain grasses, that survive harsh winters. And in late fall and early winter, plants from the cabbage family add a vibrant purple color. Make the front door the focal point with a large wreath adorned with a colorful ribbon. To finish the look, place large, colorful planters filled with evergreens beside the front door, suggests Elizabeth Lord, broker with Carolina Farms & Estates LLC in Rock Hill, S.C.

2. Give it seasonal sparkle. Transform an unused bird bath or fountain into a seasonal display by adding twigs with red berries. Or fill frost-resistant urns with twigs, winter greenery, and sparkly baubles (sold at most craft stores), Storozuk says. For extra sparkle, roll twigs in glitter and incorporate a gazing ball—a mirrored glass ball available in various colors—into the display.

3. Make the garden statuesque. Roman- or Greek-themed outdoor sculptures can add class and elegance to a garden in winter. Be sure to use frost-resistant statues so they don’t crack, Storozuk says. Place the statues strategically throughout the garden to draw buyers’ eyes around the outdoor space.

4. Light it bright. During the winter, it’s more likely that buyers will be viewing home after sunset. Use clear flood spotlights to focus on the home’s architectural features, Storozuk says. Keep exterior lighting fixtures at maximum wattage and clean them regularly. When snow covers the ground, Michele Thompson, broker-owner of White Fence Real Estate in Vevay, Ind., takes photos of listings at night with all of the interior lights on—the light bounces off the white snow to create a warm, inviting glow. For the best results, turn off the flash, and use a tripod to avoid blurring, she says.

5. Show off the lifestyle. Just because it’s cold outside doesn’t mean you can’t use the deck. Shovel your backyard sitting area and leave your grill uncovered so buyers can envision themselves using the space, Storozuk says. If the home has a hot tub, leave that open and running during showings as well.

6. Make the deck an extension of the house. Set up your outdoor tables and chairs just as you would in warmer months. “Home owners often cover their furniture and place lawn objects haphazardly on the deck,” says Kitty Schwartz, president and owner of Classic Home Staging in Katonah, N.Y. For added appeal, she adds a weatherproof cafe set with pillows that play off of interior accent colors. “Glancing out onto this type of vignette can make the indoor space feel larger and more interesting,” she says.

7. Create a photo display of sunnier days. Show buyers what the outside of the home looks like during other seasons by displaying some landscape photos in frames or using a digital photo frame with a slide show of images. “This will give a sense of what the property looks like at other times of year,” Storozuk says. If the home has a garden, make a list of what’s planted where. “Perennials can be expensive,” she says, “so treat them as a selling feature.”

8. Don’t forget to clear a path. If the ground is covered in snow, the simplest and most important thing you can do is shovel the driveway and sidewalks and keep the home’s patios and decks as clear as possible so buyers can get a sense of their true size.

By Melissa Dittmann Tracey | November 2010

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