"Open House" - Maryland Real Estate Blog

Your House is Not an ATM

As we near the end of this incredible buyer's market and head into a renewed period of  housing appreciation, there is something I need to get off my chest.

Your house is an investment in your future.  Something that should be nurtured and cherished for years and years.  As your home increases in value over the next several years, make me one promise.  Do not extract equity for trips, cars, paying of credit card debt, or any consumer purchase.  If there is one thing we should all have learned from these last few years of housing decline is that we can never predict the ups and downs of any investment.  During the years of prosperity, leave it alone and enjoy it from a far. 

I've sat down with so many homeowners over the last several years who could not sell their home because they owe more than the house is worth.  Some folks simply bought their house at the top of the market and were victims of the decline.  Others, however, who had bought earlier in the decade or sooner, used their equity for fun.  They were now stuck in a home they no longer wanted or could afford.  Some are sticking it out, many have gone to foreclosure and others sold and had to bring money to the settlement table to satisfy their debt. 

I hope this makes sense!  If not, don't be afraid to ask.

The End is Near

I don't mean to sound so dramatic, but the buyer's market is facing certain Armageddon.  It will come in three phases.

1.  Interest Rates - At the end of March, the stimulus money that has been allocated to keep interest rates low will run out.  Some economists predict the rates will go up as high as 1% over night.  It is more likely to be about .5% initially and then slowly works its' way up over the next 18 months.  I don't think that 7% interest rates are out of the question by the middle of 2011 to early 2012.  That means that a $200,000 house will cost almost $400 more per month then than it does now.

2.  Bandwagon - The job market will continue to improve slowly and steadily over the next several months which will have a cause and effect of increased sales over that time period.  The media will begin to report that housing is improving and since "everybody is doing it", then others will jump in the market.  As more people jump in, mortgages rates will increase because of the demand.  More people in the market place means no more great deals and a return of competing offers between buyers.

3.  Ease of Credit - As we continue to put time between the credit crisis, sub-prime mortgages, and other bad loans, credit and mortgages will become easier to obtain.  I hope to God that it is not as easy to get a mortgage as it was in the first six years of this century, but it is likely to ease a bit.  As credit eases, more buyers can enter the market place.  More buyers means multiple offers on properties and an increase in property values.

There are other factors, of course, that will lead to the end of the buyer's market, but these are the highlights.  The point is, if you can buy a house now, do it!  I will not tolerate anyone telling me in 2012 that they wish they bought in 2009/2010; especially if you are able to. :)

The good news is if you already own a home, you are likely to see improving values over this time period.  Especially if you own a home in the corridor between Washington D.C. and Philadelphia.  Tell all of your friends and family members to jump into the housing market now, before it is too late!

Jim Ellis - Re/Max Elite Realty

Are Interest Rates About to Rise?

Federal Reserve Bank of New York President William Dudley says the central bank will scale back its purchases of mortgage-backed securities late next month. While interest rates likely will climb when the program ceases, the extent of the rise remains to be seen.

Dudley says the Fed will act if rates spike too much. Still, analysts worry that the end of the MBA purchase program and expiration of the home-buyer tax credit, along with higher premiums and tighter underwriting of FHA mortgages, will work together to stifle home sales and price stabilization in the coming months.

Source: Inman News (02/08/10)

Housing: Undervalued and Stuck There - National News

Wells Fargo & Co. economists wrote in a note to clients last week, “The calculus of home buying and finance has changed,” summing up succinctly something that is troubling housing experts all over the country.

Housing researcher Global Insight recently released a study of U.S. housing prices that points to the magnitude of the collapse of values.

Nationwide, Global found housing values were about 10 percent undervalued, based on a model that examines interest rates, household incomes, population, and historical price patterns. That’s a modest number compared to metro areas hardest hit by the housing recession.

In Fort Lauderdale, Fla., Global calculated that housing prices were 24 percent undervalued as of the third quarter of 2009. Three years ago, it said the area was 44 percent overvalued. Global calculates that Las Vegas is now undervalued by 41 percent compared to being 33 percent overvalued in 2006.

The trillion-dollar question is: When will things turn around? As long as there is high unemployment and tight credit, many experts believe it won’t be anytime soon.

Source: Reuters News, Emily Kaiser (12/20/2009)

Census: Americans Stayed Put in 2009 - National News

Fewer Americans moved in 2009 than any other year this decade, the U.S. Census Bureau reported this month.

Population also grew less this year than any other year since the turn of the 21st Century. It reached 307 million on July 1, up less than 1 percent from a year earlier, the bureau says. About 850,000 people immigrated from other countries, down 15 percent compared to 2006.

The losers in this trend included Florida, which lost 31,000 people to other states, a first for the Sunshine State, which used to be No. 1 in attracting new residents. "The middle of the decade's huge surge to the Sun Belt stopped on a dime," says demographer William Frey of the Brookings Institution.

Demographers say real estate is one of the big reasons people are staying put. "People are trapped," says Yi Zhao, senior forecasting coordinator for the Census Bureau in the State of Washington. "They can't sell their house or they have a hard time getting credit for a new one."

Source: USA Today, Dennis Cauchon and Paul Overberg (12/23/2009)

How to be a Victim of the Federal Government While They are Trying to Help You

Let's say you have a 730 credit score, an established credit history, and over $20,000 in cash. Let's say you want to buy a house and are approved to purchase a home over $200,000. Let's say you make an offer on a condo around $150,000 and get a great deal to include all of your closing costs, a reduced price and other favorable terms. You are very excited about the purchase of this home and can't wait for a pre-Christmas settlement.

Then along comes the big intrusive monster; the Federal Government. For the purposes of this blog we will call them Grendel.

The $8,000 tax credit, while a great opportunity for many of my clients, may not be the best way to help the housing problem. I believe we would all be better served if Grendel would make an investment in easing lending guidelines. Obama has asked banks to lend more money, but isn't investing anything into helping them do so. Also, rumors have it that the Federal Housing Administration (FHA), the government organization responsible for backing today's most viable first time home buyer loan, is poised to make lending of their backed mortgages more difficult over the coming months.

In the example above, this buyer was unable to secure a conventional mortgage because the tightening of guidelines didn't allow her to use lottery winnings as part of her required money needed for the transaction. Plan B: We try for an FHA backed mortgage. Because of a complicated and unnecessary red tape scenario with Grendel, my buyer isn't able to purchase this property with that mortgage either.

This is a HIGHLY qualified buyer who can't purchase a home well within her price range. There is something wrong with this picture. Before the housing market will turn around, mortgage guidelines have to be at a place where people who SHOULD be able to buy are able to secure a loan. The housing inventory has been shrinking over the last few months, but it still remains near record levels. Want housing prices to go up again? Then the inventory must be shrunk. Want the inventory to shrink? More potential buyers need to be eligible to receive financing. I'm not suggesting that my two year old be able to get a mortgage (like 2004-2006), but easing the guidelines a little, could have a dramatic effect on getting this market turned around faster.

My two cents . . .

This blog entry was written by Jim Ellis of Re/Max Elite Realty in Baltimore, MD. Jim can be reached at jim.ellis@remax.net.

 

Report: Home Prices Likely to Hit Bottom in March - National News

Home prices in 45 of the largest housing markets are expected to fall another 4.2 percent before they hit bottom in March, according to First American CoreLogic’s LoanPerformance Home Price Index.

By October 2010, prices are expected to be heading upward again by about 1 percent compared to 2009.

The report warned that this progress could be jeopardized by an increasingly large “shadow inventory” of homes owned by banks but not yet on the market. The problem is particularly acute in Michigan and Ohio cities, the report said. It projected a 12.7 percent further decline in values in Detroit, an 11.4 percent decline in most of the rest of southeast Michigan, and a 6.3 percent fall in Cleveland.

The report expects the strongest recoveries next year in California cities. These include:

1. San Francisco, up 5.7 percent
2. Los Angeles, 5 percent
3. San Diego, 4.7 percent
4. Sacramento, 4.6 percent

Source: Inman News (12/21/2009)

Home Buyer Tax Credit Extended

 Congress has just approved a measure to extend the $8,000 first time homebuyer tax credit until April 30, 2010 and to increase the income limitation for single purchasers from $75,000 to $125,000 and for married purchasers from $150,000 to $225,000. 

Congress has also approved a new $6,500 tax credit for existing homeowners who purchase between the date of enactment and April 30, 2010.  Existing homeowners are eligible for the credit if they have used the home being sold as a principal residence for 5 of the previous 8 years.  Homes purchased using the this tax credit must be less than $800,000.   

The President is expected to sign the measure into law on Friday, November (6), 2009.

As posted by the GBBR, Greater Baltimore Board of Realtors.  Released in an e-mail on 11/5/2009.

Who is THIS Market Good For?

There are, generally speaking, three groups of buyers/sellers that are in an excellent position to move in today's market.  The disclaimer is. . . you need to have very good to excellent credit and a little bit of cash to jump in.  For the next 6-18 months credit will be tight.  If you are looking to enter the real estate market in the next year or so, check your credit and repair any damages as quickly as possible.  If you need help with the best way to repair credit, give me a call and I can refer somebody to help you.

1.  Moving Up - If you currently own a smaller home and are looking to move up to a larger home then this market is great for you.  Why?  Yes, you will take a bit of hit selling your smaller home.  It is tough to sell in this market; no question about it.  However, if you take a hit selling your smaller home, you will get much more in return buying your larger home.  Many folks are waiting for the market to "turn around" so they can move up.  Bad idea.  You may sell your smaller home in 2 seconds for top dollar, but you will be competing with the entire buyer bandwagon jumping into the market with you.  You wouldn't likely get your first pick and may end up frustrated and settling for a house that fits your needs, but not your wants.

2.  First Time Buyers - Not only are there fabulous incentives for first time buyers right now, but you can strike a deal of a lifetime.  It is hard for us to sometimes look past our noses.  A great deal today will translate into lots of $$ in the future.  This market will turn the corner.  You will most likely find several homes today that fit your needs and budget and sellers are willing to help with closing costs and home inspections.

3.  Investors - Warren Buffet says, "get scared when people are greedy and get greedy when people are scared."  Well now is the time to get greedy.  Everyone is terrified of mortgages and real estate.  There is little demand on the market place and, for an investor, it is prime time.  You can snatch great deals these days and interest rates on investment properties are incredible.  As a client of mine, you can always call me and I'd be happy to sit down with you and go through the real estate investment world.  In my opinion, it is the best investment out there.

If you are one of these people, don't hesitate.  Consider entering the market today!

If there is topic in real estate or other related field that interests you, let me know, and I’d be happy to research and present an essay or opinion on the matter. . .

Jim can be reached outside of this blog at 410.569.4663, Jim.Ellis@ReMax.net or www.JimEllisHomes.com

The Ed Norris Show

Friday morning, June 12th, at 7:30 AM, I will be appearing on The Ed Norris Show.  The show is rated #1 among radio talk shows in the Baltimore area and can be heard at 105.7 FM.  Can't listen on the radio?  Go to www.1057thefan.com to listen for free on line.  Thanks for your support.

Jim

Jim can be reached at 410.569.HOME (4663) or email jim.ellis@remax.net