Friday, April 29, 2011

4 Signals It Might be Time to Buy (vs. Rent) Your Home

To rent or to buy:  what used to be a given – that you would buy a home as soon as you could afford to – has become an agonizing conundrum for many a would-be homebuyer, in the face of the housing market’s big bust and super-slow recovery.  Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing. And that Catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.

Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:

Mortgage rates are going up.  Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.

While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come.  And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time. 

Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.

Rents are going up.  Rental rates in many areas are also on the rise – in fact, the foreclosure crisis has acted created additional demand on many markets’ rental housing inventory in several different ways. First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so.  As a result, rental homes are in high demand – and rents are rising.

Rising rents at a time when the prices of homes for sale are low and, in some places, falling?  One more signal that now might just be the time to buy. (Of course, where foreclosures are high, the chances of continued depreciation are, too – to offset this risk, have a long-term plan, to minimize the possibility that you’ll owe more than your home is worth when you need to sell.  Read on for more on how to plan for the long term and minimize your homebuying risk.)

Your income and career are stable for the foreseeable future.
  The smartest homebuyers look to their lives, not just the market, for signals about when the time is right to buy. Homebuying is a long, long-term endeavor these days. The goal is to be able to commit to staying in the same place, geographically-speaking, for 7 to 10 years before you buy (more in a foreclosure-riddled market, less in an area that has been more recession-resistant). Most lenders will require that you’ve been at your job – or in the same general field of work – for at least two years before you buy. But that’s the bare minimum – beyond that, you don’t want to be barely beginning a career in which you think you may need to move sooner than that, nor do you want to buy when you’re advanced in your career, but in an industry which is dying or downsizing the workforce in your region (unless you have a strong Plan B).

When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your homebuying dreams.

You can reasonably predict the home you’ll need in the years to come.  Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years down the road (to the best of your ability to predict, of course). You might be a newlywed with no kids now, but you plan to have them in a few years. Or maybe you’re a newly minted empty nester right now, but can project that you’ll want to retire - and might not want to climb two flights of stairs to get to and from your bedroom - 10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needs – not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.

If you’re able to predict – and afford, at today’s prices – a home with the space, amenity and geographic location you’ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent vs. buy fence.

With that said. . . buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesn’t mean you have the green light to run out and buy a home tomorrow – rather, it’s a good sign you should begin down that path, if you’re so inclined. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.
It’s not overkill to check in with a mortgage pro, a tax pro, a local real estate broker or agent and a financial planner to make sure all your ducks – not just one - are in a row before you make your move.

Wednesday, April 27, 2011

Foreclosure Activity Drops to 3-Year Lows

New data released from RealtyTrac on Thursday show the foreclosure crisis is easing: Foreclosure notices filed during the first three months of 2011 dropped 27 percent compared with the first quarter of 2010. More than 681,000 homes received a foreclosure filing during the first quarter of 2011. 

And while 215,046 borrowers lost their homes, that marks a 17 percent decrease year-over-year.

However, while the improvement may be encouraging, experts warn that the decrease in foreclosure activity is likely temporary.

"The nation’s housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low," says James Saccacio, RealtyTrac’s CEO. "Weak demand, declining home prices, and the lack of credit availability are weighing heavily on the market, which is still facing the dual threat of a looming shadow inventory of distressed properties and the probability that foreclosure activity will begin to increase again as lenders and servicers gradually work their way through the backlog of thousands of foreclosures that have been delayed due to improperly processed paperwork."

Following this fall’s “robo-signing” scandal, in which banks were accused of processing foreclosures without proper reviews, banks have slowed their pace of foreclosures until they clean up their paperwork procedures, experts say. Otherwise, the number of foreclosures would be much higher for the quarter, says RealtyTrac spokesman Rick Sharga.

Meanwhile, Nevada continues to post the highest rate of foreclosure activity, followed by Arizona and California. Nevada alone had 32,000 properties, or one in every 35, receiving a foreclosure filing.

Tuesday, April 26, 2011

Foreclosure Side Effect: Bidding Wars

A story in today’s Journal shows that the housing market is so broken that home prices are falling amid more competition for homes.
The factors feeding the competition stem from the fact that many traditional homeowners can’t or won’t sell, leaving deal-hungry buyers clamoring for bank-owned foreclosures. The trend is apparent from a range of statistics, which we highlight in an interactive graphic. But another telling one is the “sale-to-list” ratio, or the difference between a home’s final list price and its sales price. When sale-to-list is flat, it’s a draw for buyers and sellers: No discount to finalize the deal, and no extra profit amid competition. If it goes up, sellers have the advantage; if it goes down, buyers are getting a discount.
In other words, a rising sale-to-list ratio could be called, as Yale economics professor Robert Shiller said, a bullish indicator. So it’s something of a surprise to see such a bullish sign in cities hit hard by foreclosures.
But four of the top 10 markets for foreclosure resales were also in the top 10 nationally for median sale-to-list in February, according to Zillow, the online real estate portal. El Centro in Southern California, for example, was the only metro area with an even “1” for median sale-to-list; it also ranked second among metro markets in foreclosure resales. Nationally, Zillow puts the median sale-to-list at a buyer-friendly 96%, meaning buyers are getting a “4% discount.”
That’s down from May and June of last year during the tax-credit rush. To be sure, the number is seasonal, and is expected to rise in the busy spring and summer months and fall in the slow winter.
This dynamic is also fueling some major markets like San Francisco and Seattle, according Redfin, the online brokerage based in Seattle. “That is the curious dichotomy in the data – that you will see a market where prices are falling in most counties, but at the same time sale-to-list price is actually increasing,” Glenn Kelman, chief executive of Redfin.
Consider San Francisco County, which had a flat sale-to-list ratio in March, up slightly from the prior month but slightly below the year-ago number. The Bay Area overall saw month-over-month increases in the mean sale-to-list ratios in six of 12 counties for single-family homes, even though the latest S&P/Case-Shiller index shows that prices are still falling. But foreclosure resales, which tend to sell at bigger discounts, accounted for about one-third of transactions in February, according to Zillow.
These contradictory numbers are being driven by brokers like John Lee, of Pacific Union International in San Francisco. Mr. Lee estimates that about three-fourths of his listings these days are bank-owned homes.
Lenders give Mr. Lee tall orders: Sell the home in a month within 5% of the initial list price. “I have to meet those criteria, otherwise I don’t get any more assignments,” Mr. Lee says. Banks grade him on these deals, so he’s developed a system of “30-day” pricing that is a bit below market to entice interest.
Earlier this year, Mr. Lee sold a home on 34th Avenue in San Francisco for $655,000 after he initially listed it for $515,000. It was a foreclosure and Mr. Lee asked for only all-cash offers. “We knew that we priced it a little bit low because it was all-cash,” he said. There were 17 bids.
That price would fall into what Mr. Kelman called the “sweet spot of affordability” for the Bay Area that sparks buyer interest — $500,000 to $800,000. There is, in places, even a shortage inventory, he said, making it like the mall after Christmas: “all the remainders that no one else wanted but not much else new on the shelves.”
These numbers could also suggest that sellers, involving foreclosures or not, are ready for more realistic pricing so their listings don’t languish. But George Graham, chief executive of Concierge Auctions, a real estate auction firm based in New York, said sellers can be a hard group to persuade on this point. “Time is not your friend,” Mr. Graham said. “By the time you are done lowering your list price 30 or 40 percent, your house is worth less and you’ve been carrying it.”

New-home sales rise in March, but rate is still low

WASHINGTON — More people bought new homes in March, giving the battered homebuilding industry a small lift after the worst winter for sales in almost a half-century.
  • This April 13, 2011 photoshows a house for sale in the Artesia development by Mineto properties in Sunrise, Fla.
    By J Pat Carter, AP
    This April 13, 2011 photoshows a house for sale in the Artesia development by Mineto properties in Sunrise, Fla.

By J Pat Carter, AP
This April 13, 2011 photoshows a house for sale in the Artesia development by Mineto properties in Sunrise, Fla.
The Commerce Department says new-home sales rose 11% last month to a seasonally adjusted rate of 300,000 homes. That follows three monthly declines. But the pace remains far below the 700,000 homes a year economists consider healthy.
Last year was the fifth year of declines for new-home sales. Economists say it could take years more before sales return to a healthy pace. Poor sales of new homes mean fewer jobs in construction, which normally powers economic recoveries following recessions. Each new home creates an average of three jobs for a year and $90,000 in taxes, according to the National Association of Home Builders.
The median price of a new home rose nearly 3% from February to $213,800. New-home prices are about 34% higher than the median price of re-sales — more than twice the markup in healthy housing markets.

The seasonally adjusted number of new homes for sale in the United States is the fewest since summer 1967.Many builders are waiting for the glut of foreclosures and other distressed properties to be cleared before stepping up construction. But with 1.2 million foreclosures forecast this year nationwide, according to foreclosure tracker RealtyTrac, a turnaround isn’t expected for years.
Builders have struggled to compete with a wave of foreclosures and short sales — when a lender agrees to let a borrower sell a home for less than its market value. High unemployment, tight credit and a lingering fear that prices will fall further have kept people from making home purchases.
Residential construction has all but come to a halt. Building permits, a gauge of future construction, sank in the winter to their lowest level in more than 50 years before recovering somewhat in March. But that improvement was spurred by a more than 28% jump in permits for apartment and condo construction. That suggests builders believe people are flocking to rentals, not homeownership.
New-home sales rose in most regions of the country. Sales jumped nearly 67% in the Northeast, which was hit hard by winter weather; they rose almost 26% in the West; and nearly 13% in the Midwest. Sales fell 0.6% in the South, the nation’s biggest home-sale market.
Given the pace of new-home sales, it would take more than 7 months to clear them off the market. Economists say a six-month supply is healthy.

Real Estate Outlook: Builder Confidence and Existing-Home Sales

The prevalence of short sales and foreclosures has prompted a new bill to be considered in Congress. According to the National Association of Realtors, this new bill could "improve the process for approving short sales" and "bring relief to distressed home owners who are unable to keep their homes and hope to avoid foreclosure."

The process in place now is said to be time-consuming and inefficient.
Ron Phipps, NAR President, says, "As the leading advocate for home ownership and housing issues, Realtors® want to help more home owners avoid foreclosure by facilitating a short sale when a family is absolutely unable to keep their home; however, that can only happen if lenders and servicers approve short sale offers in a reasonable amount of time. Streamlining short sales transactions will reduce the amount of time it takes to sell the property, improve the likelihood that the transaction will close and reduce the overall number of foreclosures. This benefits sellers, lenders, buyers and the entire community."

And communities need all the help they can get. Builder confidence for newly built, single-family homes fell in March, leaving the Index almost stagnant for the last 6 months. According to the National Association of Home Builders (NAHB), the South was to largely blame, dropping 4 points on the Housing Market Index scale.

"The spring home buying season is getting off to a slow start due to persistent concerns about home values as more foreclosures seem to be hitting the market, increasingly restrictive lending requirements for home buyers and builders, and the slow pace of economic recovery," acknowledged NAHB Chief Economist David Crowe. "While pockets of improving activity are appearing in some markets, the best sales activity appears to be happening in the lower price ranges, where first-time buyers have greater flexibility than repeat buyers who must sell their current home. Consumers who can take advantage of today’s low mortgage rates and very attractive pricing are finding bargains and are buying." 

The good news for builders? Nationwide housing starts rose by 7.2 percent in March, according to the U.S. Commerce Department. Bob Nielsen, chairman of the National Association of Home Builders (NAHB), says, "While the overall rate of new-home production remains quite low and is still being weighed down by significant uncertainties among both home builders and buyers, this latest report is encouraging. It means that some builders are cautiously beginning to re-stock their extremely thin inventories of new homes in anticipation of gradual improvement in consumer demand as the economy slowly inches toward recovery."

All regions except the Northeast experienced gains in March. The West led the way with a 37.1 percent gain. The Midwest and South gained 6.9 and 6.3 percent, respectively.

And the sale of existing-homes rose in March, as well. This continues the uneven recovery we've been experiencing.

Lawrence Yun, NAR chief economist, expects this improving sales pattern to continue. "Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path," he said. "With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows."

And single-family home sales rose 4.0 percent to a seasonally adjusted annual rate of 4.45 million in March from 4.28 million in February, but are 6.5 percent below the 4.76 million level in March 2010. The median existing single-family home price was $160,500 in March, down 5.3 percent from a year ago. Median prices were down in all regions, ranging from 3.0 to 11.2 percent below year ago levels.
Regionally, existing-home sales rose 3.9 percent in the Northeast, but are 12.1 percent below March 2010. The Midwest saw just a 1.0 percent gain and is still 13.1 percent below year ago levels. The West dropped a marginal 0.8 percent and the South actually rose 8.2 percent.

Buyers are expected to return to the market, though. NAR President, Ron Phipps, reports, "As buyers gain more financial security, the advantages of home ownership become more obvious."

Thursday, April 21, 2011

8 Tips for Finding Your New Home

preview.jpgA solid game plan can help you narrow your homebuying search to find the best home for you.

1. Know thyself

Understand the type of home that suits your personality. Do you prefer a new or existing home? A ranch or a multistory home? If you’re leaning toward a fixer-upper, are you truly handy, or will you need to budget for contractors?

2. Research before you look

List the features you most want in a home and identify which are necessities and which are extras. Identify three to four neighborhoods you’d like to live in based on commute time, schools, recreation, crime, and price. Then hop onto to get a feel for the homes available in your price range in your favorite neighborhoods. Use the results to prioritize your wants and needs so you can add in and weed out properties from the inventory you’d like to view.

3. Get your finances in order

Generally, lenders say you can afford a home priced two to three times your gross income. Create a budget so you know how much you’re comfortable spending each month on housing. Don’t wait until you’ve found a home and made an offer to investigate financing.

Gather your financial records and meet with a lender to get a prequalification letter spelling out how much you’re eligible to borrow. The lender won’t necessarily consider the extra fees you’ll pay when you purchase or your plans to begin a family or purchase a new car, so shop in a price range you’re comfortable with. Also, presenting an offer contingent on financing will make your bid less attractive to sellers.

4. Set a moving timeline

Do you have blemishes on your credit that will take time to clear up? If you already own, have you sold your current home? If not, you’ll need to factor in the time needed to sell. If you rent, when is your lease up? Do you expect interest rates to jump anytime soon? All these factors will affect your buying, closing, and moving timelines.

5. Think long term

Your future plans may dictate the type of home you’ll buy. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in the home for five to 10 years? With a starter, you may need to adjust your expectations. If you plan to nest, be sure your priority list helps you identify a home you’ll still love years from now.

6. Work with a REALTOR®

Ask people you trust for referrals to a real estate professional they trust. Interview agents to determine which have expertise in the neighborhoods and type of homes you’re interested in. Because homebuying triggers many emotions, consider whether an agent’s style meshes with your personality.

Also ask if the agent specializes in buyer representation. Unlike listing agents, whose first duty is to the seller, buyers’ reps work only for you even though they’re typically paid by the seller. Finally, check whether agents are REALTORS®, which means they’re members of the NATIONAL ASSOCIATION OF REALTORS®. NAR has been a champion of homeownership rights for more than a century.

7. Be realistic

It’s OK to be picky about the home and neighborhood you want, but don’t be close-minded, unrealistic, or blinded by minor imperfections. If you insist on living in a cul-de-sac, you may miss out on great homes on streets that are just as quiet and secluded.

On the flip side, don’t be so swayed by a “wow” feature that you forget about other issues—like noise levels—that can have a big impact on your quality of life. Use your priority list to evaluate each property, remembering there’s no such thing as the perfect home.

8. Limit the opinions you solicit

It’s natural to seek reassurance when making a big financial decision. But you know that saying about too many cooks in the kitchen. If you need a second opinion, select one or two people. But remain true to your list of wants and needs so the final decision is based on criteria you’ve identified as important.

Negotiate the best price for your new home!

Couple negotiating house purchase
When negotiating a house sale, for every concession you make, 
ask for something in return. Image: Westend61/Getty Images

Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.

When negotiating a house sale, for every concession you make, ask for something in return.

Buying a home can be emotional, but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

Here are six tips for negotiating the best price on a home.

1. Get prequalified for a mortgageGetting prequalified for a mortgage proves to sellers that you’re serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they’ll go with buyers who are a sure financial bet, not those whose financing could flop.

2. Ask questionsAsk your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been other offers? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.

3. Work back from a final price to determine your initial offerKnow in advance the most you’re willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.

Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.

4. Avoid contingenciesSellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.

5. Remain unemotionalBuying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.

Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they may get nervous and accept your offer.

6. Don’t let competition change your planGreat homes and those competitively priced can draw multiple offers in any market. Don’t let competition propel you to go beyond your predetermined price or agree to concessions—such as waiving an inspection—that aren’t in your best interest.

More Americans Flock to the South, West

More Americans are heading to the South and West, according to the 2010 U.S. Census. The latest census data shows the largest population growth in the last decade occurred in areas of the South and West, as Northeast and Midwest residents continued to head toward warmer and less expensive Sun Belt hot-spots. 

Populations in the South and West grew 14.3 percent and 13.8 percent, respectively, from 2000 to 2010, while Northeast and Midwest areas grew by only 3.2 percent and 3.9 percent, according to the Census Bureau.

As such, the decade’s hottest housing markets also had the most rapid population growth, including Nevada (35.1 percent growth), Arizona (24.6 percent), and Florida (17.6 percent).

However, demographic factors likely will have less of an impact as it once did in the short-term in driving the housing market and prices, experts say. 

Paul Bishop, vice president for research at the National Association of REALTORS®, says he expects much of the short-term housing activity to be mostly centered on low and high ends of the market, rather than driven by merely migration patterns. He says investors likely will continue to target highly discounted homes in growing Sun Belt cities as well as in shrinking Rust Belt areas. He also anticipates an increase in sales of expensive homes. 

"The stock market has been doing pretty well, which benefits the wealthy," Bishop told Investor’s Business Daily. "And the wealthy can withstand bad economic times better than others."

House Flippers Return, Still Finding Profits

More investors are taking on the risk of flipping homes, despite falling home prices and sluggish real estate markets across the country. But investors say there are still profits to be made in the house flipping business. 

Nearly 1 million homes were bought as investment properties in 2010, according to the National Association of REALTORS®, and a record number of buyers purchasing properties with cash currently are flooding the market. 

Flipping homes for profit is easier in rising markets, but not many markets are reporting increases in home prices, analysts say. In Washington, D.C., Justin Konz of RestorationCapital says his clients are going through four of five properties a month and are making gross profit margins of 35 percent or higher.

Where to Find the Deals 

Flippers mostly are finding their homes through foreclosures auctions, REOs, and short sales. They seek homes at rock-bottom prices that will have low fix-up costs, no more than about 5 percent or 10 percent of the purchase price. 

In Florida, where investors are finding it more difficult to flip homes because of the drastic drop in prices and high inventories, flippers are targeting inner-city properties that are being sold at steep discounts. For example, some of houses are selling for $30,000 when they once sold for $200,000. 

Perry Henderson, a real estate agent and investor in Austin, Texas, says the biggest opportunities in flipping are the “ugly” houses that have lingered on the market or "old houses that somebody's grandma lived in for 40 years and didn't do anything to. Now, she's passed away and her family wants to sell quickly."

Real estate investor Brian Fuller, who with partners buys and sells more than 200 properties a year in the San Diego area, says he’s drawn to the “biggest eyesore on the block.” He says they then “ turn it into the best looking house there. We're helping pull up values in the neighborhood."

Banks Get Failing Grade in Foreclosure Handling

Banks continue to receive backlash for their handling of a flood of foreclosures across the country. A new report released this week by federal regulators finds that banks failed to do a good job in handling foreclosures and sometimes evicted home owners when they clearly should not have. 

The problems were “significant and pervasive” and added up to “a pattern of misconduct and negligence,” according to the Federal Reserve. The Fed says it soon plans to announce monetary penalties against mortgage servicers. 

The report revealed several cases “in which foreclosures should not have proceeded due to an intervening event or condition,” such as families in bankruptcy or home owners who were eligible for a loan modification or even in the process of doing a loan modification. 

The report also noted that banks had inadequate and poorly-trained staffs and improperly submitted paperwork to the courts.

In response to the report, several mortgage servicers signed a consent agreement this week, agreeing to changes that include new oversight procedures of foreclosures and reimbursing home owners who were wrongly foreclosed upon. One of the servicers signing the agreement, JPMorgan Chase, says it would add up to 3,000 employees to meet the new regulatory procedures. 

“The banks are going to have to do substantial work, bear substantial expense, to fix the problem,” says John Walsh, the acting comptroller of the currency.

About two million households are in foreclosure, and several million home owners have already lost their home to foreclosure. 

More Penalties Coming

The banks still face punishment and settlement talks with other agencies. The state attorneys general are conducting their own probe into shoddy foreclosure procedures and working with the Obama administration to overhaul the foreclosure process to prevent future abuses.

Wednesday, April 20, 2011

Housing starts, building permits both take a jump in March

WASHINGTON — Builders broke ground on more new homes last month, giving the weak U.S. housing market a slight boost at the start of the spring buying season.
  • A multi-family condominium project is under construction March 16, 2011 in Des Plaines, Illinois.
    By Scott Olson, Getty Images
    A multi-family condominium project is under construction March 16, 2011 in Des Plaines, Illinois.
By Scott Olson, Getty Images
A multi-family condominium project is under construction March 16, 2011 in Des Plaines, Illinois.
Home construction rose 7.2% in March from February to a seasonally adjusted 549,000 units, the Commerce Department said Tuesday. Building permits, an indicator of future construction, rose 11.2% after hitting a five-decade low in February.
Still, the building pace is far below the 1.2 million units a year economists consider healthy. And March’s improvement came after construction fell in February to its second-lowest level on records dating back more than a half-century.
Millions of foreclosures have forced home prices down. In some cities, prices are half what they were before the housing market collapsed in 2006 and 2007. And more foreclosures are expected this year. Tight credit has made mortgage loans tough to get. Many would-be buyers who could qualify for loans are reluctant to shop, fearing prices will fall further.
A sign of the battered industry is the number of new homes finished and ready to sell dropped in March to a seasonally adjusted 509,000 units, lowest on records dating back to 1968. And the number of homes now under construction has fallen to a four-decade low.
Starts on single-family homes, which make up roughly 80% of home construction, rose 7.7% in March. Apartment and condominium construction starts rose 14.7%. Building permits increased to their highest level since December, spurred by a more than 28% jump in permits for apartment and condo buildings.
The increase in home construction was felt in most regions of the country. Starts rose 32.3% in the Midwest, 27.6% in the West and 5.4% in the Northeast. Construction fell 3.3% in the South.
New homes can spur job growth. Each home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
The trade group said Monday that its index of industry sentiment for April fell one notch, to 16. That followed a one-point increase in March and four straight months of 16 readings. Any reading below 50 indicates negative sentiment about the housing market’s future and the index hasn’t been above that level since April 2006.
Most economists expect home prices — and by extension home sales and construction — to slip even further in 2011 before a modest recovery takes hold.

Buyers "cashing in" on Grand Strand housing market

MYRTLE BEACH, SC - Realtors say "cash is king" in the Grand Strand real estate market right now. Experts said they've seen a drastic increase in all-cash home sales. Some people have opted out of the mortgage process and cashed in on lower home prices. On the other hand, experts said, in order to avoid another mortgage mess, lenders tightened loan standards. 
"We are documenting two full years of income and history," said Travis Minter, Senior Vice President forCrescent Bank. "Gone are the days of stated income and no income loans. We are looking to document the borrower’s credit worthiness."
Even with the tighter loan restrictions in place, realtors said they are still seeing signs of an improving housing market. Experts said that some homebuyers have skipped the mortgage process and paid in cash.
Tom MaeserGrand Strand real estate analyst, said recent numbers show close to 55 percent of the homes sold were cash buyers. To put that in perspective, he said back in 2005, cash sales only made up about 13 percent of the market. Maeser said foreclosures and short sales continue to drive prices down. Experts said cash buyers can often bargain for a better deal. Lenders said borrowers do have financing options.
"FHA allows for a minimum of three and a half percent down payment. USDA allows for zero down payments," said Minter. "So affordable housing is still alive and well."
Realtors said tighter loan requirements as well as some desperate sellers have lead to a surge in cash buyers.