Pierce County Real Estate

This Month in Real Estate
July 2010

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Commentary

The U.S. housing market continues to benefit from the tax credit: home prices and sales remain above year-ago levels. As the summer progresses, however, the positive impact of government stimulus will wind down. Experts point to improved stability as a sign the market can likely hold its ground without further support from the government. However, economists indicate that the key for the housing market through the end of 2010 will be job growth and a manageable level of distressed properties.

The economy continues its journey to recovery with two steps forward and one step back, but the ground lost during the recession was great and the progress so far should be celebrated. The road to this particular recovery has been expected to be more prolonged than many previous recovery periods. Consumer confidence lowered from its high in May primarily due to a disappointing employment report, while the swelling federal deficit has also raised concern. Unmanageable debt levels have lead some European countries into their current situation, and Americans do not want to follow suit.

A job bill that would have further extended unemployment benefits has not gotten off the ground due to concerns over the deficit. Sited as a top priority for the government, a financial overhaul bill continues to proceed though Congress. The bill™s goal is to protect the financial system and the average consumer from unnecessary risk and unsound lending practices in an effort to build a stronger system for the long-term stability of the U.S. economy.

The Housing Market

Existing Home Sales

Existing home sales slowed slightly in May to 5.66 million, down 2.2% from April but up 19.2% from last May. This is the eleventh consecutive month of year-over-year increase. Lawrence Yun, NAR chief economist, attributes this to the œongoing effects of the home buyer tax credit, and he anticipates the same next month. In May, 46% of sales were from first-time buyers, down slightly from the previous month™s 49% but still considered high.

Median Home Price

The median price for an existing home was $179,600 in May, up 2.8% from a year ago and 4.2% from April. Distressed homes, accounting for 31% of last month™s sales, continued skewing prices downward slightly as they are usually discounted from comparable homes. Overall, prices this past year continued to show increased stability over the previous year. Vicki Cox Golder, president of NAR states, œWith distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus.

Inventory

Total housing inventory declined slightly to 4.89 million in May, representing between eight and eight-and-a-half month supply of sales (if homes continue to sell at the current pace consistently and no new ones come on the market). There are about the same number of homes for sale as last year, with 1% more currently available. Although there continues to be a nice selection of available homes for buyers, the 3.4% fewer number from last month helps to further stabilize prices.

Mortgage Rates

Mortgage rates fell to a new record low in June amid a drop in consumer confidence concerning the recovery. The tone of the Federal Reserve™s latest meeting was notably tempered on the outlook for recovery, indicating that the economy is stronger than last year but there is still much ground to cover. Interest rates significantly below 5% may pique the interest of more investors.

Affordability

Affordability remains advantageous, supported by the lowest mortgage rates in decades as well as lowered home prices. The home price-to-income ratio continues to remain well below the historical average of 25%, but stabilized home prices are drawing affordability back up toward more normal levels. The ratio now stands at 15.4%.

Sources: National Association of Realtors, Freddie Mac

Government Action

Tax Credit™s Closing Deadline Extended

Home buyers who signed a contract before the end of April will now have three additional months to close and still be eligible for the homebuyer tax credit. A bill to extend the deadline to September 30 obtained congressional approval on June 30, the evening it was set to expire.

Many of these buyers are purchasing short sales which have notably slower contract-to-close time frames. A KW Research study found short sales often take twice as long to close as typical home sales.

While this does not extend the credit to any additional buyers, it is great news for those 180,000 who have not yet closed on their home sale through no fault of their own.

Source: WSJ.com

Topics For Buyers & Sellers

Real Estate Investing

The increased affordability and low interest rates may have some thinking about purchasing real estate investment properties. Here are a few key points on investing from The Millionaire Real Estate Investor:

• Criteria: Criteria are the standards that define what kind of property you are looking for. These are the things that you list when you are hunting for the next opportunity to invest in: Is it a single family or multi-family opportunity? What features or amenities does it have? What is the location? These are aspects of the property that can™t be negotiated.

• Terms: This is how you turn your opportunity into a good deal. Once the property meets your criteria, terms are the negotiable aspects of your investment, such as the offer price, the down payment, interest rates, occupancy date, and closing costs. Terms are where a great deal can be created from even the most modest criteria. They mean understanding the financial basics of a transaction, knowing which elements are flexible, being systematic about getting all you can from every deal, and also, for some, knowing when to walk away.

There are some great terms right now with record-low interest rates and discounted distressed properties. Keep in mind that the lending for investment properties has additional requirements “ like cash reserves and total property limits. Talk to a professional for more information.

• Network: the people who help you find, complete, and support your real estate investments.

Contact me,

your local real estate expert,

for information about what’s going on in our area.

Don’t forget to check out this month’s video:

Newsletter Contents

1. Commentary

2. The Housing Market

3. Government Action

4. Topics for Buyers
and Sellers

Brought to you by KW Research. For additional graphs, please see the This Month in Real Estate PowerPoint Report.
In an effort to reduce the impact on the environment, This Month in Real Estate Report is available in email newsletter format.
Please consider the environment before printing.

This Month in Real Estate
June 2010

……………………………………………………………………………………………………………………………..

Commentary

The housing sector continues to show signs of recovery. Together the tax credit (which expired at the end of April), the more upbeat consumer confidence, and favorable market conditions all contributed to bolstering April™s sales activity – with existing home sales increasing for the second straight month.

The return of buyer confidence with much of the home price correction believed to be over, encouraging economic developments and historically low mortgage rates, will provide the stepping stone for further market stabilization.

Meanwhile, stagnant job growth and elevated levels of foreclosure continue to be cause for concern. The government is now taking proactive steps to restructure the mortgage industry with risk-management measures seen by experts as a œhuge cut in red tape that would ultimately benefit consumers.

The Housing Market

Existing Home Sales

Existing home sales strengthened in April to 5.77 million, up 8.7% from March and 22.8%from last April. This is the tenth consecutive month of year-over-year increases.

According to Lawrence Yun, NAR chief economist, although part of the uptick was expected from the tax credit, there™s also been a return of buyer confidence, for those who remained on the sideline last year. The return of confidence is a result of stabilized prices, an improved economy, and continued advantageous interest rates.

In March, 49% of sales were from first-time buyers.

Median Home Price

The median price for an existing home was $173,100 in April, up 2.1% from a year ago and 4% from March. Distressed homes, accounting for a third of last month™s sales, continued skewing prices downward slightly as they typically are discounted 15% compared to typical home sales. Overall, prices this past year showed increased stability over the previous year.

Inventory

Total housing inventory rose slightly to 4.04 million in March, representing slightly less than an eight-and-a-half month supply of sales (if homes continue to sell at the current pace consistently and no new homes come on the market). Compared to the previous year, there are now 3% more homes on the market. Although this is the first rise in twenty consecutive months of decline when compared to the previous year, NAR™s chief economist believes this increase can be attributed to the summer selling season and that home prices are back on track.

Mortgage Rates

Mortgage rates dipped back below 5% this month due largely in part to the European debt crisis. As confidence in the value of the Euro eroded, more investors chose the U.S. dollar instead. With more demand for dollars, the cost of debt (interest rate) dropped. This event has also shown the global recovery is not free-and-clear of roadblocks to complete recovery. However, experts still anticipate rates will increase to between 6% and 6.5% by the end of the year. As the recovery gains increasing traction, the Federal Reserve will need to increase rates to prevent inflation.

Affordability

Affordability remains advantageous, supported by some of the lowest mortgage rates in decades as well as less expensive home prices. The home price-to-income ratio continues to remain well below the historical average of 25%. The ratio now stands at 14.9%.

Sources: National Association of Realtors, Freddie Mac

Government Action

FHA Turns to Lenders to Monitor Brokers

As the Federal Housing Administration (FHA), the government agency that insures home loans, saw its market share rise to about one-third of the mortgage market last year, up from 2% in 2006, the number of brokers seeking to arrange FHA-backed loans has mushroomed to 9,043 at the end of 2009 from 5,759 just two years earlier.

The agency, finding itself inadequately equipped to monitor its brokers, is shifting the responsibility to its lenders.

The FHA expects the new policies to result in better risk management, and the cut in red tape should produce better rates for consumers.

As of May 20, the FHA no longer certifies mortgage brokers or tracks the performance of brokers™ loans. Instead, lenders are now required to sponsor brokers and assume responsibility for loans they originate, including losses from fraud or mistakes in underwriting. In addition to revamping broker insight, the agency also beefed up oversight of its lenders by increasing net-worth requirements to $1 million from $250,000. The change is in effect for one year for existing lenders.

Source: WSJ.com

Topics For Buyers & Sellers

Myths about Distressed Properties “ Debunked!

Distressed properties “ foreclosures and short sales alike “ represent potentially great value for prospective buyers. However, common misconceptions about the time and money investment involved with buying such properties may keep many from inquiring further into this market. KW Research survey findings, taken from more than 2,500 KW associate respondents who have worked with distressed properties, can help steer clear of concerns as you make your way to homeownership.

Contact me,

your local real estate expert,

for information about what’s going on in our area.

Don’t forget to check out this month’s video:

Newsletter Contents

1. Commentary

2. The Housing Market

3. Government Action

4. Topics for Buyers
and Sellers

Brought to you by KW Research. For additional graphs, please see the This Month in Real Estate PowerPoint Report.
In an effort to reduce the impact on the environment, This Month in Real Estate Report is available in email newsletter format.
Please consider the environment before printing.