Monday, August 13, 2012

Time to buy a house is NOW

·         If you can pull it off, buy a house

·         NEW YORK – Aug. 13, 2012 – Investment opinions are like, um, noses: Everyone has one. Buy stocks, sell bonds? Go long steel and short copper? Buy sheep, sell deer?

It’s pretty easy to see both sides of an investment argument. But it’s hard to argue against buying a house now, assuming you can get a loan.

The housing cycle is a long one, in part because buying a house moves at a glacial pace, at least compared with the time it takes to buy a stock or bond. If you’re not pre-approved for a mortgage, you have to submit to a credit check, which, these days, is only slightly less intrusive than a CIA background check. You have to get the home inspected. You have to figure out the various fees your bank charges, including the one marked “Just because we can.”

How long is a housing cycle? Pretty long. A relatively modest housing bubble, by today’s standards, occurred in Boston in the late 1980s. Average home prices, adjusted for inflation, hit $310,000 in October 1987. Home prices didn’t hit that level again until May of 2000. Someone who bought at the high had a long wait to get even – particularly in light of the broker’s commission.

Home prices bottomed, however, in March 1993 – roughly six years after the top. History doesn’t repeat itself precisely, but it’s interesting to note that the top of the last housing bubble was six years ago, in 2006.

Why be bullish on housing?

Prices. You can always buy low and watch prices go lower. But by many measures, home prices are still cheap. The median single-family home price – half higher, half lower – hit its nadir in January, dropping to $154,600, the lowest since October 2001, according to the National Association of Realtors. That’s down from a high of $230,900 in July 2006.

Existing-home prices rose in June to a median $190,100, up 8 percent from June 2011. Those are still 2003 levels.

Supply. The good news is that the enormous supply on the market is shrinking. It takes a wearisome amount of time for supply to shrink, in part because there are people who have wanted to sell their homes for many years, but haven’t been able to get the price they want. As prices rise, more homes come on the market.

Nevertheless, Ned Davis Research, a respected institutional research firm, estimates that excess supply of houses on the market should be eliminated by the end of 2013. When excess supply dries up, people start building more new houses, which has the virtuous effect of reducing the unemployment rate and increasing the economy generally.

Mortgage rates. The average 30-year fixed-rate mortgage rate is 3.59 percent, according to mortgage giant Freddie Mac. That’s above the all-time low of 3.49 percent the week of July 26, but close enough. It’s conceivable that at some point in the next 30 years, your interest rate would be less than the rate of inflation.

Assuming you financed 80 percent of the median single-family home, or $152,080, your mortgage payment would be about $691, excluding taxes and other irritations. About $5,589 of your first year’s payments would be tax-deductible mortgage interest.

Thanks mainly to low home prices and interest rates, the NAR’s housing affordability index rose to its highest level on record. (The higher the index, the more affordable the average home. The index also takes into account average family income, which has been falling since 2008.)

What could go wrong? All sorts of things. You may not be able get a loan. Bankers are insisting on checking things that seemed far too troublesome during the housing bubble, like whether you have a decent credit rating, a down payment, or a job.

The other problem is that houses are leveraged investments – that is, you borrow money to buy them. Let’s consider the example above, where someone buys a $190,100 house and finances $152,080.

Your investment is $38,020. Let’s say that the worst happens: Home prices fall, and you have to sell the house for $175,000.

Unfortunately, the bank won’t split the loss with you. You’ll get back $22,920 from the sale, and wave goodbye to $15,100 of your downpayment. That’s a 40 percent loss, even though your house has fallen 8 percent in value.

There are other risks with homeownership, ranging from termites to ghosts in the hall closet. But if you’re planning to live in your home for a long time, you have the money, and you can get financing, it’s a fine time to buy.

© Copyright 2012 USA TODAY, a division of Gannett Co. Inc.

 

Cape Coral Florida

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Thursday, August 2, 2012

Housing market turning around. Prices moving up

National Association of REALTORS(R)

FROM THE President
Encouraging Signs

 

We're seeing a lot of encouraging signs in the housing market across the country. NAR's latest existing–home sales report shows there's not inventory to meet the demand in many areas and that's driving up prices and creating multiple bidding situations. These findings vary greatly from what we've had before. Hear more from an interview I did recently with XM radio, and be sure to share it with your clients.

Listen to President Moe Veissi's radio interview

http://www.realtor.org/audio/moe-veissi-discusses-encouraging-signs-in-housing-market-on-xm-radio?om_rid=AABhLk&om_mid=_BQGxlvB8tHU1W6&om_ntype=NARWeekly

Moe Veissi Discusses Encouraging Signs in Housing Market on XM radio

02:04

Listen to an interview with NAR President Moe Veissi on XM radio where he talks about encouraging signs in the housing market, including year-over-year price increases, lower inventory, and even multiple bids in some instances. He provides tips for people considering buying a home and what to do ahead of time before beginning the search for the perfect home

 

 

 

Cape Coral Florida

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Housing market lifts off from the 'bottom'

Housing market lifts off from the ‘bottom’

WASHINGTON – Aug. 2, 2012 – Recent housing indexes have shown single-family home prices are on the rise, providing more evidence that the “bottom” of the market is already behind.

“We’re wiping out just about all of the decline,” Joel Naroff, chief economist at Naroff Economic Advisors, told NBC.com about recent housing data showing home prices inching up. “It indicates the market has turned the corner on the pricing side.”

Some recent housing indexes suggest that the “bottom” of the market was reached in January 2012. Since that time, housing prices have been picking up in many housing markets.

But “the turnaround in home prices was unexpected,” says Patrick Newport, an economist with IHS Global Insight. “The conventional wisdom in February, following that landmark agreement (of the $26 billion mortgage settlement with the nation’s five largest banks), was that we would see a surge in foreclosures of some size that would lead to lower home prices. This surge never materialized and home prices have turned.”

Newport points to several signs of a housing market on the mend. For one, housing starts are up after reaching a low in the fourth quarter of 2011. Also, he says the Federal Housing Finance Agency’s (FHFA) monthly House Price Index shows a 3.7 percent increase in May year-over-year, which he notes is higher than inflation and “means that real housing wealth, a consumer spending driver, was also up.”

The increase in home prices is also leading to a fewer number of homeowners underwater on their mortgages. The number of underwater homeowners fell from 12.1 million at the end of 2011 to 11.4 million at the end of the first quarter this year, according to CoreLogic data.

Source: “Evidence Mounts that Home Prices Hit Bottom Last Winter,” NBC News (July 31, 2012)

© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688

 

 

 

Cape Coral Florida

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