Posted by: Marvin Remmich | May 27, 2014

WHEN IS THE RIGHT TIME TO BUY AND WHEN IS THE RIGHT TIME TO SELL

May 27, 2014

            

EVERY DAY IS MEMORIAL DAY…..

While the “official” observance was yesterday, I believe that every day is Memorial Day in the hearts and minds of those of us who understand its true significance.   My father and father-in-law both served with the members of the Greatest Generation and were among the lucky ones to come back and relate their experiences.  So many others, then and now, were not so fortunate and we owe them a tremendous debt of gratitude for the sacrifices they made in order for us to live in peace.  Those who gave their lives for our country are the true heroes amongst us.

 

THE TIME TO BUY IS NOW

Lots of reasons to BUY NOW and I’d like to share some of them with you. Total home ownership is right around 64.7% compared to 69.1% seven years ago.  Some of this can be attributed to foreclosures from the housing meltdown and some to the new mortgage loan regulations.  Whatever the reason, the situation is creating an increase in renters.  If you are wanting to sell and trade up, you might want to consider keeping your present home as a rental.  With historically cheap mortgage money and long term appreciation better than you could get elsewhere, this is an option worth considering if it makes financial sense to you personally.

Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University, revealed five financial reasons people should consider buying a home in his paper on homeownership entitled: “The Dream Lives On: the Future of Homeownership in America.”

  1. Housing is typically the one leveraged investment available.

Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money.  As a result, homeownership allowshouseholds to amplify any appreciation on the value of their homes by a leverage factor.  Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity.  With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

  1. You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

  1. Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

  1. There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income.  On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

  1. Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom line?  Not only does homeownership makes sense for many Americans for social and family reasons, it makes sense financially.

 

HOUSING RECOVERY REGAINS SOME STEAM BUT REMAINS WEAKEST LINK IN ECONOMIC RECOVERY

The Wall Street Journal, 5.23.14, USAToday, 5.23.14, The Gazette, 5.24.14, inman.com, 5.21.14

The housing recovery regained momentum for the first time this year during the critical Spring selling season.  Sales of existing homes rose 1.3% in April to a seasonally adjusted annual rate of 4.56 million, according to the National Association of Realtors.  It was, however, 6.8% lower than the year ago level.

This comes after a particularly harsh winter nationwide and “we think the recent slump in home sales may now be in the past”, said Daniel Silver, economist at J.P. Morgan Chase.  The coming months are crucial for the U.S. housing market because families prefer to move to a new home in a new school district by the end of summer, among other reasons. 

On the positive side, the supply of homes in April increased from March while price gains eased—two trends that could help pull more Buyers into the market and boost sales further if they continue.

Lawrence Yun, chief economist of NAR expected the improvement.  “Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point.”

“We’ll continue to see a balancing act between housing inventory and price growth, which remains stronger than normal simply because there have not been enough Sellers in many areas.  More inventory and increased new-home construction will help to foster healthy market conditions,” Yun said.

NAR President Steve Brown said that there was some heating of the market last moth.  “The typical time on market shrunk in April, with four out of 10 homes selling in less than a month,” he said. 

“Homes that show well and are properly priced tend to sell the fastest.  More housing inventory gives Buyers better choices, and takes the pressure off the buying process, which is a welcome sign, especially for first-time Buyers.”

Properties sold faster for the fourth straight month in April, reflecting the prolonged lag in inventory relative to demand.  The median time on market for all homes was 48 days in April, down from 55 days in March.  It was 43 days on market in April 2013.

Fannie Mae Chief Economist Doug Duncan thinks that improving financial and labor market conditions should also contribute to a rebound, with economic growth in April, May and June accelerating to an annual rate of 3 percent. 

The outlook for housing “remains more worrisome with existing-home sales, new-home sales, housing starts and multifamily housing all experiencing year-over-year declines despite improving consumer attitudes,” Duncan said.  “However, we anticipate a modest uptick in housing activity as the Spring and Summer selling and buying seasons get under way.”

Fannie Mae economists say that “given the current regulatory landscape, we believe rising employment and income are more likely to bolster housing demand rather than easing credit conditions.”

In March, existing homes were selling at the slowest pace (4.59 million units a year) since July 2012, and were down 6.6 percent from a year ago for the first quarter as a whole.

One bright spot, however, is the growing number of consumers surveyed by Fannie Mae who say it’s a good time to sell a home.  “As consumers become more confident in the selling environment and more supply enters the market, it will help to boost turnover,” Fannie Mae economists said.  “Leading indicators of home sales point to cautious optimism in the near-term outlook.”

Fed Chair Janet Yellen appeared before Congress several weeks ago and said that the recent housing slowdown “could prove more protracted” than expected.  While neither Yellen nor other surveyed economists expect a housing rebound that began in 2011 to reverse course, they say the turnaround will be more gradual, crimping economic gains in 2014. 

 

THE MAIN CULPRITS BEHIND THE HOUSING SLOWDOWN…AND A POSSIBLE SOLUTION FOR FIRST TIME BUYERS

RealtorMag 5.22.14, NAR, 5.22.14

Rising mortgage rates are the main culprit for the weakening in home resales this year and they could further dampen existing home sales, according to a new paper published by John Krainer, an economist at the Federal Reserve Bank of San Francisco.  He also cited other factors such as the fragile economic recovery and the retreating of investors who have slowed their market share as home prices rise. 

Fed Chair Janet Yellen cited “very slow household formation” as young adults saddled with student debt continue to live with their parents.  “My expectation is that as the job market strengthens…we’ll see household formation pick up, but it’s hard to know here what exactly the new normal is,” she said.

New mortgage lending regulations which took effect on January 10, 2014 have also made it difficult for many, especially first time homebuyers, to obtain mortgages. 

The FHA has recently announced a plan to expand access to mortgage credit for underserved borrowers according to Department of Housing and Urban Development Secretary Shaun Donovan. 

Donovan said that the FHA will launch a housing counseling program later this year.  The four-year, two-phase pilot program, called Homeowners Armed With Knowledge (HAWK) will offer a 50 basis point reduction in the upfront mortgage insurance premium and a 10 basis point reduction in the annual premium at the time of loan origination to first time home buyers who complete the program.  Loans that remain in good standing will also receive reductions, which could add up to thousands of dollars in savings for homebuyers over the life of their loan. 

 

5 REASONS TO HIRE A REAL ESTATE PROFESSIONAL

keepingcurrentmatters, 5.20.14

Whether you are Buying or Selling a home, you need an experienced Real Estate Professional in your corner.  I’ve been telling you this for a long time, but today’s new rules and regulations makes For Sale By Owner (FSBO) more confusing and difficult than ever.

The reasons have not changed, but they have been strengthened in recent months as the market recovers.

  1. What do you do with the paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing.  A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

  1. Ok, so you found your dream home, now what?

There are over 230 possible actions that need to take place during every successful real estate transaction.  Don’t you want someone who has been there before, who knows what these actions are, to make sure that you acquire your dream?

  1. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home.  However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the Buyer (who wants the best deal possible) to the home inspections companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to during the process.

  1. What is the home you’re buying/selling really worth?

Not only is it important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market, but you also need someone who is not emotionally connected to your home, to give you the truth as to your home’s value.

According to the NAR, “the typical FSBO home sold for $184,000 compared to $230.000 among agent-assisted home sales.”

Get the most out of your transactions by hiring a professional.

  1. Do you know what’s really going on in the market?

There is so much information out there on the news and the Internet about home sales, prices, mortgage rates: how do you know what’s going on specifically in your area?  Who do you turn to, to tell you how to competitively price your home correctly at the beginning of the selling process?  How do you know what to offer on your dream home without paying too much or offending the seller with a low-ball offer?

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman”—Dave Ramsey

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one.  You need some one who is going to tell you the truth, not just what they think you want to hear.

Bottom Line?

You wouldn’t try to replace the electrical wiring in your home unless you were an electrician nor install new sinks or toilets unless you were a plumber.  Why would you want to make one of the most important financial decisions of your life with hiring a professional? 

 

 

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