September 2011  Market Update

The U.S. housing market has shown notable stability in 2011 compared to the previous two years when the tax credit made a clear impact. Although recent economic indicators have been less than expected, including a downward revision of GDP and consumer confidence that mirrors early 2009, owning a home is still valued by the majority of Americans. 72% of renters say owning is a top priority for their future, up from 68% a year earlier.

However, most aspiring homeowners are held back by two main factors: funds for a down payment (82%) and confidence in their job security (80%). Federal Reserve Chair Ben Bernanke emphasized the importance of a healthy housing market to a robust recovery. He stressed the adverse effects of tighter credit conditions for borrowers, urging Congress to take tax and policy measures to help stabilize the market. He also noted the significance of addressing long-term fiscal policies including debt levels, upcoming expenses to support an aging population, and taxes.

Buyers continue to benefit from historically favorable buying conditions, and sellers are encouraged by increased market stability. Although the Fed made a commitment to keep its interest rate at the current level until mid-2013, mortgage rates can, and often do, still fluctuate. In the midst of these reports, it is important to keep in mind the path to recovery was always expected to be a long and uneven road. As we progress toward a stronger recovery, economic improvement typically spurs rising interest rates in order to keep inflation in line.

Home Sales

in millions

Home sales in July were up by 21% from the same month last year  when the expiration of the tax credit resulted in a significant drop in sales. However, they were down 3.5% compared to June. This could be due in part to NAR’s report that 16% of members experienced a contract failure from issues in underwriting and appraisals during July. NAR President Ron Phipps states, “For both mortgage credit and home appraisals, there’s been a parallel pendulum swing from very loose standards, which led to the housing boom, to unnecessarily restrictive practices as an overreaction to the housing correction.”

Home Price

in thousands

Home prices dipped by less than 1% in July with median home price at $174,000. This is 4.5% below the year-ago level which followed a strong spring season of sales driven by the tax credit. Median home prices remain close to 2002–2003 levels. Distressed sales continue to count for almost 1 in 3 homes sold. The combination of low prices and record-breaking low interest rates means that home affordability is extremely favorable.

Inventory- Month’s Supply

in months

The supply of homes measured in months on the market at their current pace of sales was up slightly during July compared to June. This is in keeping with historical trends, which show that inventory levels typically rise during the summer months. The month’s supply remained 25% below the peak of 12.5 months in July 2010 and 13% above April of 2010 when the home buyer tax credit was in full swing.

Source: National Association of Realtors

Interest Rates

Mortgage rates hit a new record low in August of 4.15%, primarily due to uncertainty in the global and domestic economies. While these incredible rates represent a significant savings for home buyers, experts note that for the benefits to be fully realized, lending conditions must loosen to enable more buyers to take advantage of them. As overall economic activity gets back on track, rates will likely rise to keep inflation in check. In other words, the window of opportunity for buyers to lock in these historically low interest rates will not last forever.

Source: Freddie Mac

This Month’s Video

Topics For Home Owners, Buyers & Sellers

As the weather gets cooler, some homeowners could be considering undertaking home renovations or updates before the holiday season. Here are a few findings about updates and home sales:

1. Homeowners typically spend considerably more on updates to their home when planning to live in and enjoy it, with an average of nearly $9,000.
2. In contrast, they only spend an average of $3,400 when making updates in preparation to sell.
3. The most common updates sellers performed before listing were paint, flooring, and light fixtures.
4. Although the majority of buyers were least likely to compromise on the location, 16% were least likely to compromise on updates.
5. 75% of homes sold were either fairly updated or very updated.
6. Sellers began repairing their home 1 to 8 weeks in advance of listing.

Source: KW Market Navigator and KW Research

Bruce Bachtel

(864) 313-3606

Brought to you by KW Research. For additional graphs and details, please see the This Month in Real Estate PowerPoint Report.

The opinions expressed in This Month in Real Estate are intended to supplement opinions on real estate expressed by local and national media, local real estate agents and other expert sources.  You should not treat any opinion expressed in This Month in Real Estate as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion.  Keller Williams Realty, Inc., does not guarantee and is not responsible for the accuracy or completeness of information, and provides said information without warranties of any kind.  All information presented herein is intended and should be used for educational purposes only.  Nothing herein should be construed as investment advice.  You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.  All investments involve some degree of risk.  Keller Williams Realty, Inc., will not be liable for any loss or damage caused by your reliance on information contained in This Month in Real Estate.

Most Important Reasons to Buy a Home

When we talk about homeownership today, it seems that the financial aspects always jump to the front of the discussion. However, the study shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, are:

• It means having a good place to raise children and provide them with a good education
• You have a physical structure where you and your family feel safe
• It allows you to have more space for your family
• It gives you control of what you do with your living space (renovations and updates)

The Home as an Investment

Though most people purchase a home for non-financial reasons, everyone realizes there is a money component to homeownership. Here is what they said on this issue:

• 65% of the general population (and 67% of homeowners) believe that homeownership is a ‘safe’ investment.
• 56% believe that homeownership has more potential as an investment than any other traditional asset class.
• 69% think that now is a good time to buy a home (this number has increased in each of the last two quarters)

Rent vs. Buy

We are always interested in the difference people see in renting vs. owning.

• 63% of renters have aspirations to someday own their own home
• 72% of renters think that owning is superior to renting
• 95% of homeowners see homeownership as a positive experience (4% see it as a negative experience) while 82% of renters see renting as a positive experience (17% see it as a negative experience)
• 96% of homeowners live in a single family residence while 46% of renters live in a multi-unit building

Article at kcmblog.com

The Wall Street Journal: Why It’s Time to Buy

CBS Money Watch: Why the Time to Buy is Now

Forbes Magazine: 9 Reasons to Buy a House Now

National Public Radio: For Many, It’s Still a Good Time to Buy a Home

With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy. Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home. Here is some information to consider.

Interest Rates

Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.

Lending Standards

The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things will happen:

1. The qualification process for loans will become more difficult
2. The cost of a loan will increase

Bottom Line

There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).

Article provided by kcmblog.com

1.) This is when your house will get the most exposure

The spring, and particularly the month of May, is when most buyers enter the real estate market. This surge of buyers dramatically increases the exposure for your house . The best chance of getting quality offers (perhaps even multiple offers) is RIGHT NOW!

2.) Foreclosures and short sales will increase in about 90 days

The good news is that the number of people paying their mortgage on time is increasing. This will lead to less distressed property sales later this year and throughout 2012. The not-so-good news is that there is still a large inventory of existing foreclosures and short sales that will still be coming to market.

As an example, LPS reported in their latest Mortgage Monitor that:

• There are still twice as many loans going 90+ days delinquent as are starting foreclosure
• There are almost three times the number of foreclosure starts as there are foreclosure sales
• Distressed property inventory levels are almost 45 times the rate of monthly foreclosure sales

This means that there is a backlog of properties which will start coming to the market in about 90 days as banks clear up their paperwork challenges. These properties sell at dramatic discounts. They will be your competition. Both Fannie Mae and Freddie Mac have recently discussed the magnitude of this challenge.

3.) Interest rates have risen over the last six months

Interest rates have stabilized recently. However, in the last six months, interest rates have climbed over 1/2%. Every time the rates increase 1/4%, approximately 250,000 buyers are eliminated from qualifying for a mortgage. In an environment of volatile rates, waiting could mean that there will be fewer buyers eligible to purchase your house. It also could mean that you will pay a higher rate on the next home you buy.

4.) Qualifying for a mortgage is about to get even more difficult

Besides increasing rates, there are other factors that will hinder a buyer’s ability to qualify for a mortgage as we move forward. Lending standards have been getting tighter over the last year. And as the government debates the new proposed guidelines (QRM), banks are gearing up for even more stringent standards.

Morgan Stanley recently stated:

“Recent developments in issues such as GSE reform, Dodd-Frank securitization rules, and foreclosure settlement issues suggest a tighter and more expensive environment for mortgage credit.”

This may impact any potential purchaser for your property and may also impact your next purchase.

5.) It’s time to get on with your life

Probably the most important reason to sell is so you can get on with your life. You placed your home on the market for a reason. Do not allow a less-than-stellar housing market prevent you from reaching your goals as an individual or as a family. Think about the reasons you decided to move in the first place. Are these reasons still important to you? If you have to take less than you were originally hoping to get for your house, your family has a question to ask each other: Is the dollar difference in sales price worth putting off our plans? Only you and your family know the answer to that question.

Bottom Line

If you plan to sell this year, the reasons above prove that selling now makes more sense than waiting to later in the year. Give me a call today, Bruce Bachtel 864-313-3606 so we can talk about your best options.

Article by: kcmblog.com