Housing Recovery Moves Up

Evidence is mounting that the steadily strengthening housing recovery is moving beyond lower priced homes, where the lack of inventory is greatest, into mid-tier and even luxury housing, according to the first market report on July sales.

ClearCapital reported today that national median home prices in July picked up the pace of growth over both the rolling quarter and year, with Western markets leading the way, where growth is shifting to higher priced market segments.

“July home price trends continued to show promise at a time when the strength of the broader economy is in question on many fronts,” said Dr. Alex Villacorta, Director of Research and Analytics at ClearCapital. “The national housing market defied the drag of a softening economy with increasing gains of 2.0 percent over the last rolling quarter. Housing gains in the West continued to lead the nation, and more importantly, for the second month in a row, the price rebound has broken out of the low price tier segments into higher priced homes. As the pool of buyers expands, the West continues to position for the next phase of recovery.

Western price gains broke out of the lower priced segment ($140,000 and less) and into higher priced homes (sales greater than $347,000). The migration of price gains indicates the emergence of a more broad-based demand, which will ultimately be necessary for a more mature recovery.

Most price growth has come in lower tiers where inventory is tightest. Demand among first-time buyers and investors is greater and supplies have been limited by higher levels of negative equity and continued slow processing of foreclosures. 

Villacorta said gains in the West appear to have moved beyond the first phase of the recovery. Initially, low price tier homes led the downturn, accumulating yearly losses of 36.5 percent by March 2009. Subsequently the low tier segment was the first to shake off losses in March 2012, as investors started capitalizing on discounted deals with attractive cash flow potential. Over the last six months, low tier momentum strengthened, and as of July, prices had been bolstered by 10.0 percent growth year-over-year.

Yearly growth for the broader national market expanded to 2.2 percent in July, 0.5 percentage points higher than June. Boosting growth at the national level, the West saw home prices roll up an impressive 6.2 percent over the previous year. The South and the Northeast also contributed to national price growth, with 1.8 percent and 1.6 percent yearly gains, respectively. While the Midwest has yet to post long term growth, the slight decline of 0.1 percent improved over last month’s yearly losses of 0.6 percent.

July marked the third consecutive month of national yearly gains, with longer term price trends at the national level last seen this strong in September 2010, when the First-Time Homebuyer Tax Credit temporarily drove prices higher. Without external stimulus driving demand, this latest round of gains is particularly encouraging. Strengthening fundamentals have finally allowed prices to move beyond stability and into a seemingly sustainable growth mode, providing reason for consumers to feel more confidence in housing overall.

Overall, the top 15 metros came in strong for July on both a quarterly and yearly basis, with average returns of 7.8 percent and 8.3 percent, respectively. Five of the top 15 metros rolled up double digit growth over the last year, a solid indication of a rebound well under way in many top markets. Phoenix continued its impressive run as the leader in annual gains for four consecutive months, with the highest yearly growth of 23.8 percent.

Confidence in housing will be key to future progress, giving buyers a reason to get off the sidelines, resulting in higher demand that could feed additional gains, and creating a positive feedback loop. Certainly the alternative is still possible, where a hiccup in consumers’ outlook could stall progress, further diminishing the willingness of a homebuyer to make a purchase, Villacorta said.

“While significant risks remain at large, housing now has the potential to enter a positive feedback loop. Price increases could lead to increased confidence. This could motivate buyers, propelling the recovery in spite of the potential economic slowdown outside the housing market. Of course it’s still possible that housing could experience a pull back if contagion from other economic sectors bleeds through, but right now there appears to be a healthy level of resilience,” he said.

If you are in the market for a home at the lake, please contact the Spouses Selling Houses team. Until next time. Ebbie :)

Why Buying Is A Good Idea

"The large numbers attached to a real estate purchase can often overwhelm first-time home buyers, so they continue to rent as a result," says Dan Auito, a Kodiak, Alaska-based real estate consultant and the author of "Magic Bullets in Real Estate." But, he adds, "the advantages far outweigh the risk or effort required in obtaining and maintaining one's own personal residence."

Those perks are both financial and feel-good. According to the National Association of Realtors, record numbers of Americans have purchased a home in recent years. U.S. Census data show a total of 68.3 percent of Americans are homeowners.

Here are six significant reasons to grab that hefty piece of the ownership data pie:

• Tax deductions: Although they're the stuff that bill-paying grumbles are made of, mortgage interest and property tax obligations are a homeowner's best friend come April 15. For both federal and state income taxes, these payments are usually fully deductible. And in the first years after a home purchase, most of the money paid toward those mortgage payments represents interest. Think of it as a government subsidy on the purchase. In addition, many closing costs, such as points paid and fees for your loan application and appraisal, may be deductible, either immediately or down the line when you plant that "For Sale" sign in your lawn.
• Appreciation: We're talking about the financial kind. Homes are considered a safe, steady investment, with values that rise while debt amount drops. The national median home price has risen every year --even during recessions and periods of sales declines -- since 1968, when the NAR began tracking it. Typically, the values appreciate at the rate of inflation, plus 1 or 2 percentage points. Sometimes it's a greater increase. In 2004, for instance, the median price went up by 9.4 percent. A long-term investment? Yes. Harvard University's Joint Center for Housing Studies found a dramatic increase in the rate of return on housing the longer it's held. For example, a buyer who makes a 10 percent cash down payment with an annual home appreciation rate of 5 percent could expect a 94 percent return on the cash after three years of homeownership . After five years, the return increases to 225 percent, and after 10 years, a whopping 623 percent. 

Equity: The portion of property that's actually owned, or equity, also rises over time. "Owning a home allows you to build the equity that accompanies appreciation," explains Timothy Spangler, CEO of a real estate investment company and author of "From the Rat Race to Real Estate." He adds, "You can't build equity if you are a renter." Moira Cotlier of New Haven, Conn., is a good example. "We paid rent to landlords for nine years before buying our house. Nine years," she says. "Do you know how many tens of thousands of dollars that was for places we had no stake in? What a waste!" Since 2001, she and her husband, Keith, have been paying themselves instead. Mary and Rich Hallahan, who own a Madison, N.J., home, think of the investment this way: "You are forcing yourself to save by investing in an asset over time," she says. Their home, purchased in 2002, has appreciated by about 10 percent since then. What's more, a first home often leads to a better second home. Equity buildup and appreciation in a first home help in the transition to a second. According to the NAR, first-time home buyers' median down payment is 3 percent; repeat buyers, meanwhile, put down 22 percent.

Borrowing power: For owners who opt to stay put, equity still comes in handy. It can be used to secure a loan or obtain a line of credit, meaning "more buying power to fund home improvements or to assist with the purchasing of investment property," Spangler says. Cash for emergencies or big-ticket items is also an option.

Stability: Renters generally have no idea what they'll be paying a few years down the line. Home owners with fixed-rate mortgages, however, essentially have the same payment for up to 30 years. Even those with adjustable rates have a cap and can figure out their maximum potential mortgage payment. The stability also comes from the sense homeowners get of being anchored to their community. "It gives you a little more leverage when it comes to community issues and activism," Cotlier says. "When you own your home, and you're paying taxes on it, you might have your voice a little better heard when it comes time to speak up about neighborhood or community issues."

Freedom: Speaking up within your home is also much easier when you own it. No need to worry about "the downstairs neighbors complaining you're too loud, or the upstairs neighbor stomping around at 1 a.m.," says Sandy O'Keefe, who rented for about eight years before purchasing a Mansfield, Mass., home with her husband, Rob, in 2004. O'Keefe also appreciates the decision-making autonomy. "You ... pick every paint color [and] won't get fined for scratches on the wall," she says. The decision-making extends to the yard as well. Cotlier sums up the homeownership benefits in one word: roots. "You can plant perennials and enjoy them forever. You can plant a tree and watch it grow and grow. You can plant a family and watch it blossom.

                                                                                                                                                                                                                        

If a home at the lake is in your future, contact the Spouses Selling Houses team. Until next time!! Ebbie :)

Mortgage rates lower than last record

Mortgage rates fell again, smashing previous record lows, according to a regular weekly release from mortgage giant Freddie Mac.

The rate for a 30-year, fixed-rate loan, the most popular mortgage product, dropped to 3.62% from 3.66% last week. The rate has matched or hit a new low for 10 of the past 11 weeks, Freddie Mac said. Meanwhile, the 15-year fixed rate fell to 2.89%, down from 2.94%.

"Recent economic data releases of less consumer spending and a contraction in the manufacturing industry drove long-term Treasury bond yields lower over the week, and allowed fixed mortgage rates to hit new all-time record lows," said Frank Nothaft, Freddie Mac's chief economist.

The 15-year fixed-rate mortgage is popular among homeowners who are seeking to refinance or to trade-up and minimize their total interest payments. At the current rate, a borrower financing $200,000 would pay $1,370 a month and spend a total of just under $47,000 in interest over the 15-year span of the mortgage.

Related: Where home prices are rising fastest

Buyers who want to minimize their monthly payments by opting for a 30-year loan would have payments of just $911 a month on a $200,000 loan. But they would pay $128,000 in interest over the life of the loan.

One year ago, the same 30-year loan would have carried a 4.6% rate and cost about $100 more a month.

Rates will probably stay low for a while, according to Keith Gumbinger of HSH.com, a mortgage information provider.

He pointed out that the spread between Treasury yields and interest rates is still wider than usual, with a full two percentage points separating them. More typical is a spread of about 1.7 percentage points.

That means mortgage rates could have even further to fall if Treasury yields drop or even hold steady.

If you are in the market for a new home at the lake, please contact the Spouses Selling Houses team. Until next time! Ebbie :)

Numbers are up and prices are down!

The good news is that the real estate market at the Lake of the Ozarks continues.
Sales volume in terms of units and dollars is up, and foreclosures are down.

There was cautious optimism after the first quarter of the year when sales continued a trend seen last year. Total units sold at the lake in the first quarter were up about 11 percent, and are now up about 13 percent from the previous year as of July 8.

This information is from the BDAR Multiple Listing Service.

The market at the lake has trended up in sales of units for the last three years. Everyone wants to know if we have reached the bottom of the market, and based on the reports the bottom was in 2010. The problem in determining the bottom is that you can only know when that has occurred when the bottom has already passed.

Sales volume
Sales volume for all types of properties as of July 8 was $182,761,641. That compares to $156,452,696 for the same six-month period of 2011, an increase of $26,308,945 or 14.3 percent.
Reflecting the increase is sales volume is the number of total units sold, which went from 889 through July 8 of last year to 1,026 for this year.

Consistent with the trend, lakefront homes are up 18 percent in units and resale condos are up 27 percent in units sold compared to the same period last year.

Despite the improving overall market, there are some parts of the market that have remained flat such as commercial and non-lakefront land.

Waterfront lots

Long a difficult segment of the market to show signs of life, waterfront lots have started to sell. The units sold are up slightly from last year, but Realtors have seen the average sale price jump by $47,924 to $174,557. That’s an increase of more than 27 percent.

As of early July this year, 23 lakefront lots had sold compared to 18 a year ago for the first six months.

Building has picked up nationwide, and it appears that the lake will follow. Offshore homes are up 6 percent in units sold compared to last year’s numbers with days on market increasing to 150 from 161. There were 348 offshore homes sold through July 8 this year compared to 328 

Foreclosures down

Foreclosure sales at the lake are down in units 14 percent from last year from 199 last year to 174 this year. Condos were only market segments that saw an increase in foreclosures. New condominiums (original sale) jumped from no foreclosures a year ago through July 8 to 4 this year; re-sale condominiums edge up one from 18 a year ago to 19 this year.

It is almost impossible to find a lakefront foreclosure now. Buyers come into the market place obviously wanting a deal and ask Realtors for foreclosures. It is difficult to make them accept that we were never a foreclosure market with less than 1/2 percent listing being in foreclosure.

Buyers wanting a foreclosure often expand to owner sales that are motivated and get the type of property that they are interested in at as good of a price without the uncertainty of the foreclosure property.

The future

Of course, the wild card is always the election. But, with the attractive interest rate and consumer confidence building nationwide, we don't expect to see any significant negative effect regardless of the election results.

On the market

Market Time for lakefront homes has increased slightly to 181 days on the market but, the list-to-sale price ratio has improved to 93.3 percent from 91.6 percent last year.

The average sale price in lakefront homes is down to $291,853 which is reflective of buyers rushing in to snatch up the deals.

Condo units on the market is flat at 183 days. The list-to-sale price for condos has increased to 94.8 percent from last year same time period of 93.8 percent.
 

If you are in the market for a home at the lake, please contact the Spouses Selling Houses team. Until next time! Ebbie :)

How Much Home Can I Afford?

If you are looking to purchase a home, you might be wondering “how much house can I afford to buy?” With the mortgage rates at their all-time lows and the housing market still favoring buyers, this may be a good time to buy. But how could you tell how much house you can really afford and that you’ll be ready for homeownership? This article will cover various methods that you can use to determine how big a mortgage you can take on.

20% Down Payment + 10 Years

Personally consider these as the conditions that you must meet before you even think about buying a house. You should be able to pay the 20% down payment from your savings, and plan to stay in the house for at least 10 years. If you can pay the 20% down payment from your savings, it shows that you have healthy positive cash flow, which allowed you to save up the money in the first place. If you do not have the pre-requisite savings, you should consider cutting your expenses and increasing your income to save up for the down payment before plunging into homeownership.

The 10 years portion is simply to help increase the likelihood that you will come out financially ahead after factoring in the costs of buying, selling, and living in your home. If you are planning to stay in your house for less than 10 years, you should consider renting instead.

3 Rules of Thumb

Up to 3 Times Your Annual Gross Household Income

The first rule of thumb is to take your annual gross household income — basically, the money you and your spouse make in a year before taxes — and multiply that by 3. For example, if you earn $40,000 a year and your wife earns $50,000 a year, your household income is $90,000 and you can afford up to a $270,000 home.

This is a quick way of calculating, but the main problem with this rule is that it doesn’t take into account your other debts.

Housing Related Payments Less Than 28% of Your Monthly Gross Household Income

The second rule of thumb is that your monthly housing related expenses (i.e., mortgage payment (principal + interest), real estate taxes, and homeowner insurances) should be less than 28% of your monthly household income. From the example above, your monthly income is $90,000 divided by 12, or $7,500 per month. Therefore your monthly housing expenses should be less than $2,100 ($7,500 x 28%).

Using a mortgage amortization calculator, $2,100 a month will buy you a $300,000 home at 5% 30-year fixed mortgage rate, assuming your real estate taxes and homeowner insurance is less than 2% of the purchase price, e.g., $6,000 per year.

Total Debt Payment Less Than 36% of Your Monthly Gross Household Income

The third rule of thumb is similar to the one above, but this rule takes into account all of your debt obligations such as student loan payment, credit card debt payment, and any other debt that you may have. From the example above, 36% of $7,500 is $2,700.

The rule is a nice way to double check other rules. For instance, if you are making a $500 car loan payment a month, $250 student loan payment a month, and another $750 payment toward credit card debt; then you only have $1,200 left for house payment — this means you can only afford a $170,000 house and not the $300,000 house from the previous example.

This is why it is important to limit the amount of debt with respect to your income before adding more debt — i.e., a mortgage — to your budget.

Mortgage Pre-Qualification

A second method of determining how much house you can afford is to go directly to the lender and ask for a loan pre-qualification. Many lenders have online application that you can fill out in less than 10 minutes. After you fill out the pre-qualification application, a representative will call you for addition information and verification. Usually, you will find out the same day the following information (1) the amount of loan that you are qualified for, (2) the estimated interest rate (this rate is “floating”, meaning it is subject to change), and (3) the estimated closing cost. Also note that this process will cause a hard pull and will likely lower your credit score for about 3 months.

The pre-qualification is usually good for 90 days, however, the final loan approval is subject to sufficient proof of income and asset.

Simulate Your Mortgage Payment Experience

The problem with all the methods mentioned above is that they do not take your financial habits into account. So what is the best way to answer this question: How much house can I afford?

The best answer is to simulate your home ownership experience — test drive it! For example, let’s say you’re paying $1,300 a month in rent today, and you’re looking at a $1,500 monthly mortgage payment. To be conservative, we’re going to add a 20% premium on top of the mortgage to account for homeowner’s insurance, real estate taxes, private mortgage insurance (PMI), maintenance, and additional utility costs, for a total of $1,800.

Are you ready for a test drive?

It’s easy. Since you’re paying $1,300 in rent, all you have to do is save the $500 difference each month. The best way to do this is to put the money into a separate savings account that pays a decent interest rate. You should do this for at least a few months to see if you can adjust to the new lifestyle.

• If you have no problem with the extra savings — That great! You’re financially ready and the extra money saved can go toward your down payment or emergency fund.
• If you find yourself making compromises to hit the savings goal — Then you are going to be "house poor". You should look for a less expensive house, find more ways to trim your expenses, or look for ways to increase your income. You don’t want your house to become a financial barrier to achieving your other goals.
• If you are struggling to consistently save the difference – Then you should reevaluate your homeownership goal and financial priorities. May be a less expensive house, or a more frugal lifestyle is the solution, may be not.

Buying and owning a home is an exciting experience, but it’s not always the right choice for everyone. For home ownership to be rewarding the house should be both physically and financially comfortable.

If you find that you are in the market for a new home at the lake, please contact the Spouses Selling Houses team and let us go to work for you. Until next time!! Ebbie :)

Home Starts Are On The Rise

Builders broke ground on the most new homes in more than three years, government data showed Wednesday, adding to evidence that the housing recovery is standing on firmer legs.

The Commerce Department reported that privately-owned housing starts hit a seasonally adjusted annual rate of 760,000, up 6.9 percent from May's revised 711,000. It's also almost 24 percent above the rate in June of last year.

The reading, which is prone to significant revisions, was above the median forecast in a Reuters poll of a 745,000-unit rate.

Building permits, which are a good indicator of future construction activity, slid 3.7 percent to a 755,000 pace.

The U.S. housing market, which collapsed six years ago, has been a relative bright spot in the economy this year, although it remains hobbled by a glut of unsold homes.

Federal Reserve Chairman Ben Bernanke said on Tuesday the sector has shown modest improvement.

On Wednesday, the Mortgage Bankers Association said applications for loans to buy homes jumped last week as the interest rate on 30-year mortgages fell to a record low. In recent weeks, other private groups have said signed contracts for home purchases rose sharply in May and home prices rose that month.

The Commerce Department's revisions to data on housing starts from prior months were also upbeat. Groundbreaking during May was revised up to a 711,000-unit pace from a previously reported 708,000 unit rate. April's reading was also revised slightly higher.

Still, the broader U.S. economy has looked much more wobbly of late, and the housing sector is now so small it provides limited support. Indeed, if the recovery fails and the country tips back into recession, housing would also suffer.

n Bernanke's testimony before lawmakers on Tuesday, he said the U.S. economic recovery was being held back by anxiety over Europe's debt crisis and the path of U.S. fiscal policy. Planned belt tightening by the U.S. government in 2013 would send the country into recession, he said.

While Bernanke offered few new clues about whether the U.S. central bank was moving closer to a fresh round of monetary stimulus, he said policymakers meeting later this month would be looking closely for signs of any stall in the recovery of the labor market.

The pace of hiring in the United States slowed sharply in the second quarter, as did growth in factory output. Retail sales have also flagged in recent months.

The Commerce Department's report showed the increase in housing starts in June was spread broadly throughout the sector, with groundbreaking for single-family homes up 4.7 percent. This segment accounts for most of the market. Starts for multi-family homes - one of the report's more volatile readings - rose 12.8 percent.

If a new home at the lake is in your future please contact the Spouses Selling Houses team. Until next time! Ebbie :)

Why this may be the perfect time to buy real estate

Well, it’s only taken half a decade, but the moribund real estate market is finally starting to show signs of life. If you were thinking about making a move on a piece of property, right now is possibly the best time. You can still take advantage of low prices in most places around the country, and mortgage rates are at once-in-a-lifetime record lows: 30- and 15-year fixed mortgages are around 4% and 3%, respectively. 

Although prices are still near 2003 levels, the signs of an impending resurgence are everywhere you look. The number of people signing contracts to buy houses rose by around 4% in March, according to the National Association of Realtors, and is the highest it’s been in nearly two years.

Many would-be homebuyers are surprised to find that one fixture of the bubble era is back: the bidding war. According to a recent survey of 28 housing markets conducted by the Wall Street Journal, there are fewer houses for sale in every single one of those places than there were last quarter. This relatively tight inventory in markets as varied as Sacramento, Phoenix and Washington, D.C., dictate that the law of supply and demand is going to kick in. Even in places like Long Island, N.Y., where there’s still a depressing 16-month buildup of housing supply (realtors consider six months’ worth to be a healthy number), the number of available homes is falling.

An increase in short sales is actually a good sign: Short sales do less damage to their surrounding neighborhoods than foreclosures do, both because foreclosures drive values down further and often fall victim to neglect or vandalism. Short sales are also better for banks because they get distressed properties off their books faster and don’t have to pay as much in legal and administrative costs. In a recent blog post, RealtyTrac vice president Daren Blomquist writes, ”Banks have recently been given additional reasons to opt for short sales rather than foreclosure over the past 18 months,” and he forecasts what he describes as a “surge” in short sales this year. By some measures, it’s already begun: Short sales first eclipsed foreclosure sales in November, according to Bloomberg, and RealtyTrac data shows short sales climbed by a third from the beginning of this year as compared with the same period last year.Buyers are no longer shying away from “distressed” properties; that is, short sales and foreclosures. The foreclosure specialists at RealtyTrac.com say there are even bidding wars on foreclosures, because investors know these rock-bottom prices aren’t going to last forever.

Part of what’s driving this movement is more buyers are snapping up properties as rental investments or as vacation homes for themselves. Vacation-home sales grew by 7% last year, as the rising cost of travel drove people to look at “getaways” closer to their primary residences. Trulia chief economist Jed Kolko tells the Wall Street Journal, “People choose second homes that are a shorter drive rather than a plane flight away.”

Purchases of investment properties soared by 65% last year, with many buyers scooping up cheap foreclosures and renting them out. Data from real estate number-crunchers CoreLogic shows that the conversion of foreclosures to rentals will be more than a $100 billion business this year and for the next few years.

People are starting to figure out the huge potential in this market: More than a quarter of all the houses sold last year were investment properties. Fortunately for such buyers, there’s also an unprecedented degree of demand for rental housing: Homeownership hit a 15-year low in the first quarter of this year, according to data from the U.S. Census Bureau, and rent rates, which climbed an average of 5% last year, are historically high compared with the cost of homeownership.

In some places, such as college towns, a buyer-investor often can make an even greater return on the purchase price of a house. In two-thirds of the places surveyed in Coldwell Banker’s College Home Listing Report, you can buy a three-bedroom house for under $200,000. SmartMoney.com points out if the kid renting the house is your offspring, you also can net significant tax savings by purchasing a home and then renting it back to them, thanks to more lenient rules about renting to a family member versus a stranger. (Gift tax laws let you give your son or daughter up to $13,000 a year toward offsetting the cost of those monthly bills, although tax experts recommend that you avoid commingling your accounts and keep a paper trail of canceled checks or rent receipts.)

A new survey from home builder PulteGroup finds that 60% of people renting today would prefer to own their own homes, the Wall Street Journal says. This is good news if you don’t plan on being a landlord forever. When mortgage lending standards loosen, there will be pent-up demand from all those renters looking for a place to call their own. The desire to own a home is particularly strong among the so-called “echo boomers,” adults under 35 years old. This demographic made up 31% of home purchases last year, the National Association of Realtors says, but that’s still a relatively small slice of the roughly 62 million echo boomers in the United States.

Of course, these young adults are also the same ones who have been clobbered by sky-high student loan debt and above-average joblessness, which is keeping some of them on the sidelines of the housing market. Economists say as they mature and attain more financial stability, more will make the transition from renters to homeowners. The desire for homeownership is there; an Urban Land Institute survey conducted in 2010 found that two thirds of 18- to 32-year olds expect to own their own homes by 2015. Even among the remaining one third, 70% say they’ll own a home at some point in the future.

For Americans who either have cash to buy or a credit score good enough to obtain a mortgage, there’s still time to get a killer deal on real estate, but that window may be closing. If your finances can support it, now appears to be a great time to buy.

If you are in the market for a new home at the lake or looking to list your existing property, please contact the Spouses Selling Houses. Until next time! Ebbie :)