4 Financial Reasons to Buy Now

4 Financial Reasons to Buy Now
by The KCM Crew on April 12, 2011

For Buyers

As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.

Interest Rates Are Increasing
Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.

The 30-Year Mortgage May Disappear
There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage?

QRM Requirements Could Be Much More Stringent
Here are proposed changes to the requirements for a ‘qualified residential mortgage’:

Certain mortgage types would be eliminated
You would need to put a minimum of 20% down
You would need a minimum 690 FICO score
The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)
There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).

Rents Are Expected to Increase
The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:

“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”

Bottom Line
You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.

Month’s Shadow Inventory: State by State

Month’s Shadow Inventory: State by State

by The KCM Crew on March 29, 2011 · 17 comments

in Foreclosures,Pricing,Short Sales

Last week, we reported on the National Association of Realtors’ (NAR) Economists’ Outlook and gave you a map showing the percentage of overall sales that distressed properties represented in each state. Today we want to show you another map from the same NAR outlook. This one shows the number of months shadow inventory by state:

 

NAR explained their methodology:

The map shows the number of months it would take to clear the shadow inventory by state. The months’ supply is estimated by dividing the shadow inventory and the monthly number of distressed sales. The numbers range broadly from 51 months in New Jersey to 7 months in Nevada. When looking at months’ supply it is important to keep in mind that this estimate highly depends on saturation of distressed sales. Given that New Jersey over the past year on average reported about 20 percent of existing home sales to be distressed sales, it will take a longer period for the shadow inventory to clear. In contrast, Nevada’s distressed sales averaged a considerable 70 percent share of the existing sales and at that rate the current shadow inventory would clear in 7 months.

Bottom Line

Appreciation of residential real estate will not take place until a region works their way through the shadow inventory that exists. This map gives you an indication of when that will occur in your state.

Is a housing double dip around the corner?

The S&P/ Case - Shiller home price index covering 20 major markets fell 3.1% year after year and we are hovering near the bottom lows set in 2009.  Some feel that in the next few months we could experience a double dip in home prices.  New home sales were off 10% in February.  There is still too much inventory glut out there for prices to improve.   Mortgage rates have remained low helping homeowners save on their month payments.  Investor homes are priced low enough to be a bargain which attracts more buyers.  The one thing that could derail a recover is rates.   If rates head back up to the higher 5′s or even the 6% level this could certainly fuel a double dip.   Only 2 markets out of the 20 covered had positive gains, Washing DC was up 3.6%  and San Diego edged up 0.1%

Will I Get More Money If I Wait?

Will I Get More Money If I Wait?

by The KCM Crew on March 11, 2011 · 0 comments

in For Sellers,Pricing

Sellers in any real estate market are looking to get the best possible price. If you are looking to sell in the next year, today’s price may well be the best price. Home values stabilized somewhat in 2010. Many hoped that was a sign that values had bottomed out and we would see price appreciation in 2011. Studies released this week have painted a different picture.

If we look at CoreLogic’s January Home Price Index (HPI), we see that prices are again beginning to decline:

National home prices, including distressed sales, declined by 5.7 percent in January 2011 compared to January 2010…

Mark Fleming, chief economist with CoreLogic, said, “A number of factors continue to dampen any recovery in the housing market. Negative equity, which limits the mobility of homeowners, weak demand and the overhang of shadow inventory all continue to exert downward pressure on housing prices. We are looking out for renewed demand in the coming months as the spring buying season gets underway to hopefully reduce the downward pressure.”

They are not talking about the spring market increasing or even stabilizing prices. They hope it will “reduce” the pressure to drive prices lower.

Radar Logic’s RPX Composite Price comes to virtually the same conclusion:

Radar Logic believes the RPX Composite price will continue to exhibit year-on-year declines throughout 2011 due to a growing supply of homes for sale and in the inventories of financial institutions, and weakening demand due to the reduction of government incentives for home buyers. Moreover, banks are facing uncertainty over whether they will be forced by regulators to expand mortgage modifications, and may reduce lending and tighten standards as a result.

“No matter what you call it, a ‘double dip’ or the continuation of a long process of deterioration, the current trend in home prices is evidence that housing markets are continuing to languish,” said Quinn Eddins, Director of Research at Radar Logic. “We expect the negative trend to continue under a severe supply overhang that includes a large and growing ‘shadow inventory’ of homes in default or foreclosure.”

Bottom Line

It seems that prices have again begun to fall nationally. With the overhang of existing and shadow inventory, prices will probably continue to decline throughout most of 2011. If you’re thinking of selling, now might be the best time. Check with a local real estate professional to see how this might impact your area.

Should you be buying a home now?

Most people are still in the mind-set that home prices will continue to drop.  In some areas that very well may be true.  I think home buyers need to be thinking also about cost.   We previously showed you t a 130,000 mortgage in November 2010 cost you $89.00 less than the same mortgage today.  How is this possible?  Rates have risen from a national average of 4.17% to 5.03%.  As the economy and job market improves we will see higher interest rates.  The higher the interest rates, the higher the cost of the home in the long run.  If you’re thinking about waiting for home prices to bottom out, you need to factor price vs. cost to make sure your timing is financially right…

Oil could hender the recovery?

We have all seen oil prices skyrocket over the past several days as Libya cuts oil productions.  One can only imagine if oil continues to rise and we see gas prices in the $4 + range the US will sure feel the sting.  Oil rises above $100 a barrel Thursday morning 2/24/11 and could continue.   Could this hurt the housing market and over all economy, my guess is sure…

Is this the new trend?

Home buyers as this chart suggest, the cost of a $170,000 house in November of last year was almost $90 dollars cheaper a month than today due to higher rates.  Is this a trend that could continue, absolutely!   Now is the time to buy before rates rise even higher.