Saturday, October 27, 2007

Buyers: Don't Wait Too Long!

Historically, the interest rates of today are extremely low. Back in the late ‘80s and early ‘90s, interest rates of 9-12 percent were common. But today, interest rates are substantially lower. With that said, though, interest rates are starting to creep up. So if you wait too long to take advantage of the great rates available, you may end up paying more than you need to for a home.
For example, a lot of sellers made the mistake of waiting for the market to peak before listing their home. However, many of them waited too long, and by the time they listed, the selling market had already started its decline-hence the high inventory. As a buyer, every day you wait to buy a home is another day for the interest rate to rise. So even if you wait for a seller to lower their price by $10,000, if you take a mortgage rate that’s a percent higher, the amount of money you save on the home’s asking price is meaningless because you’re paying more than that amount in financing fees.
Think about it. If you were to buy a car and only look at the monthly payments and not the overall cost of the car, people would say you were being naïve. The finance fee definitely impacts the price of the car, just as it impacts the price of your home. So since prices are down, act now. While you’re waiting for home prices to decline further, your finance charges will continue to rise.

Thursday, October 18, 2007

Here Come the Buyers!

Just in the last week I have received several calls from buyers ready to start looking. Every single one of them was putting off looking for property, knowing that prices have been dropping. Nobody wants to miss out on those low interest rates either, which we know will go up eventually, so now seems to be ideal in every way.

I have to admit I was suprised especially after hearing comments from other agents saying that it seemed as if all the buyers just disappeared. I haven't had any brand new leads for about two weeks (that's a long time for the amount of business I usually do). I was starting to worry, myself. I'm usually pretty optimistic about the local market since things are still moving.

So just like that people are deciding that the tables have turned just enough to get serious about buying. I got a mixed group of leads, too. Investors looking for rentals, first-time buyers and seasoned buyers looking for another primary residence.

This is of course good news for sellers because even if they've had to drop their price, many listings have not had any offers in months. Now maybe more of them will at least get something acceptable on the table.

Wednesday, October 17, 2007

Top 10 Reasons To Buy NOW!

1. Selection, selection, selection. Regardless of the price range a buyer desires, there are plenty of houses from which to choose. Just a few years ago the resale inventory dropped below 5,000 units. A buyer was forced to make compromises if they were going to locate the home of their dreams. There is a great selection of attached homes, condos, and townhouses. You can find large lots, small lots, and a lot that will accommodate your boat or RV. There are lots of options in this market.

2. No Bidding Wars. In 2005 we had one client that made an offer on ten homes. They lost the first nine to the 'feeding frenzy' that existed. Other buyers bid the properties up substantially from the original listing price. There were escalation clauses where buyers authorized their agents to outbid other offers by thousands of dollars. There is no competitive bidding in this buyer's market.

3. You can make an offer. A few years ago when you made an offer, the only question was how high above the list price could the buyer reach in hopes of being the best offer on the table. Today the sell price list vs. price ration is about 96%. A seller will not be insulted if you 'make them an offer they can't refuse'.

4. Patience is tolerated. In the hot seller's market that existed everything was rushed. Find a house before other buyers did. Hurry up and make the offer. Today a buyer can take their time. Look at several homes and think about your decision for a few hours.

5. Due diligence is welcomed. In this market a buyer is encouraged to obtain a home inspection, termite inspection, and appraisal. In 2005 many buyers waived these contingencies in order gain an advantage with multiple offers.

6. There are plenty of specs. In the not too distant past buyer had to 'play games' if they wanted a new home. There were lotteries and waiting lists in order to obtain new construction. Some buyers slept in their cars in order to get to the head of the lines. R.L. Brown estimates that builders have thousands of specs ready for immediate occupancy.

7. Repair requests are welcomed. After a buyer completes a home inspection, they are allowed to submit a repair request to the seller. In the past a seller might insist the home was sold 'as is'. Many times, there were back-up buyers waiting for a primary buyer to upset the seller whose home was increasing in value almost daily.

8. Few, if any investors. It is estimated that one third of all sales in 2005 were to investors. These non-owner occupied buyer caused the market to inflate and affordability to decline. Mortgage fraud became commonplace. It's a great time to buy without having to compete with hundreds of prospective landlords.

9. Location, location, location. Today's buyers can find homes closer to work. In the past buyers flocked to outlying areas in order to find affordable homes. In this market, reasonably priced homes are within biking or walking distance to schools, rapid transit lines, and relatives.

10. Real Financing is available. The 'wink, wink' zero down, no doc, adjustable, sub-prime loans are gone. Fixed rates are back. FHA financing, first time homeowner bond programs, special loans for teachers, and police officers are back in business. It's a great time to buy real estate!

Sunday, October 14, 2007

Zillow's numbers show slight price-drop

U.S. home values have declined slightly on a year-over-year basis for the second consecutive quarter, according to numbers tracked by home valuation site Zillow.com.The site's online analysis measures national values as well as those in 46 metropolitan areas, including the value of all homes in an area, not just those sold.Only the Pacific Northwest is largely bucking the decline. Four of the top five highest-appreciating metropolitan areas are located in Washington State or Oregon. Areas with the most depreciation are on the Gulf Coast of Florida.Zillow for the first time has compared what the "average" American home (3 bedrooms, 2 bathrooms, 1,500 square feet) is worth in 46 metropolitan areas. The price is highest in various California cities, with Santa Barbara's typical home value topping the list at $816,022. The most affordable typical homes are in the Midwest and South, with Tulsa, Okla., posting the most affordable value at $97,059. 5 highest-appreciating metro areas (year-over-year):

Corvallis, Ore.: 17.26 %
Grand Junction, Colo.: 16.57%
Seattle-Tacoma-Bremerton, Wash.: 12.03%
Bellingham, Wash.: 11.68%
Portland-Salem, Ore.: 10.72 %5

Metro areas that lost the most value (year-over-year):

Sarasota-Bradenton, Fla.: -15%
Punta Gorda, Fla.: -12.43%
Santa Barbara-Santa Maria-Lompoc, Calif.: -11.83%
Pittsfield, Mass.: -8.62%
Reno, Nev.: -8.5%
REALTOR® Magazine Online

It's Back to the Future for Real Estate

The serious decline in housing sales in many parts of the country is well documented. This downturn was preceded by several years of rising home prices in many areas. In some cases, prices rose beyond levels that were supported by local salaries, and were clearly not sustainable. The driving force fueling the rise in home prices was the availability of low interest money. Easy availability of home mortgage money, plus historically low interest rates, allowed the demand side of the market to build.
When buyers could expect 15 percent to 30 percent appreciation and get 6 percent interest rates, who would not be motivated to buy? It was a no-brainer! Of course, high demand leads to higher prices. And, high demand leads to more new homes, as builders respond to the demand.
The flow of money for mortgages came from new and unregulated sources. In the not too distant past, government regulated entities, such as Fannie Mae, were the main buyers of mortgages from lenders. More recently, Wall Street investors entered the market for buying real estate loans. Alternative loans, interest-only loans, 100 percent loans, creative ARMs, no-documentation and other high risk products became commonplace. Some of these loans began with a low interest rate that the borrower barely qualified for, and then switched to a higher rate after a short time. In many cases, the borrowers did not understand the risk they were taking.
For most of my experience in real estate, buyers usually put 5 percent to 20 percent down, with 28 percent of their income allowed for mortgage payment and their income was fully documented. When we began to see 100 percent financing on contracts, we were a little concerned by the shortage of personal investment, or skin in the game, as they say. The underlying expectation was that the market value of the home would increase quickly, and the buyers would be covered, if they needed to sell. Home ownership became speculative.
Sub-prime, alternative, no-doc and other high risk loans are not limited to low income or poor credit buyers and are not always predatory. Often, very sophisticated borrowers chose to keep their cash and leverage the purchase. In all price ranges, the easy availability of low interest money fueled the demand for home ownership, as well as investment in rental property. Inevitably, the demand for homes led to price increases and elevated inventories, as builders produced more homes. Then, the cycle was broken.
What caused the break? Foreclosures. Investors soon realized mortgage-backed securities contained more risk than expected, and they stopped buying them. Suddenly, lenders did not have this new market for selling many of their loans. Without the flow of funds for easy mortgages, demand for homes slowed down. Prices began to fall in many parts of the country, and oversupply conditions prevailed. This has created challenging conditions for many homebuilders.
Of course, real estate markets are local and some localities will fare better than others. Job growth, continued low interest rates and reduced supply from builders are key factors contributing to more balanced local real estate markets. But, in nearly all areas, the effects of the ?new? tighter requirements for home mortgages will slow the market.
For the next year, sellers will have to consider the fundamentals to attract a buyer. They will need competitive pricing, excellent presentation and top-level marketing. Buyers will have to have a down payment, good credit and proper income for their loan. So, for the next few years, it's back to the future for real estate.

Tuesday, October 9, 2007

Portland's Real Estate Market

I just did a search in the local RMLS and found that there are 94 new listings for the eastside in the last three days. 39 listings have gone pending. I just have to say to all you sellers out there; unless you have a lot of equity and need to sell, maybe now is not the best time. Even as a new listing, you are out there amongst a sea of other listings and buyers are overwhelmed with choices. Be prepared to price drop accordingly for a timely sale.

Buyers, on the other hand, are in a great position right now. As long as your financing isn't sub-prime. The interest rate is still low, there is a ton of inventory and as fall fades into winter, prices will drop. This is especially good for investors buying rental properties. As non-qualifying buyers get pushed back into the rental market, rents will go up and vacancies will be filled.

So instead of selling, look at re-positioning your equity into a rental property. You'll thank me later!!