New Year, New Market?

Welcome to 2011! Most people want to know when the real estate market will finally rebound and they also want to know if the market will continue to fall. I believe we have hit bottom and that prices have begun to stabilize. Foreclosures and short sales will continue to trickle into the market throughout this year which will give buyers one last really good opportunity to buy at the "bottom". How can I reasonably predict this? Well, here's how, many of these foreclosures that come onto the market at really cheap prices are being snapped up in a matter of days by all cash investors who are paying over full price. Did you hear what I said? Bidding wars on foreclosure properties that are priced low. Non-foreclosure properties are also getting multiple bids if they are priced right which means slightly under market value. I plan on buying more homes this year than I did last year since I feel the market is about as low as it is going to go.

Happy New Year everyone!

Housing Market Update

The spring market was pretty active with many first buyers wading into the market. The Government's tax credit helped people decide to get off the fence and actually purchase. Lots of buyers rushed to get into contract by April 3oth and to close by June 30th in order to receive $8000 (first time buyers) or $6500 (trade up buyers). The time table to close has now been extended til September but this will only help buyers who had already signed their contracts by April 30th.

The big fear now is that since the Government will no longer be offering incentives to purchase, buyers will no longer be as enticed into buying since they are still a bit shaken by the market place. Interest rates are incredibly low even lower then I ever thought I'd see in my lifetime. The fixed 30 year rate is around 4.5% and the 15 year is around 4% which is just incredible. The problem remaining is that banks are still holding onto their money and not lending that easily. We still need to see banks loosening their grip and credit getting easier to obtain before we will see any big strides in a housing rebound. Home prices have flattened out and have basically hit bottom. Many housing markets across the country are beginning to see slight rates of appreciation but our housing market is flat right now and foreclosures and short sales are still heavily flooding the market. Investors and savvy buyers are quickly snapping up good deals and they have been numerous bidding wars all over our area. It will still take some time before we have a completely stabilized market therefore there is still great opportunities out there for buyers to capitalize on.

Stalling a Solid Recovery

Well I still believe that we have hit bottom but as I said before we will not see a strong recovery til 2012. There are still too many obstacles in the way of any real significant market changes. The biggest obstacle is still the tightest credit market we have seen in years which is keeping many potential buyers from purchasing due to their inability to secure mortgage financing. Even the FHA is about to tighten their lending standards by decreasing the allowable seller's concession which is currently at 6% down to a paltry 3%. Couple this with the increased down payment requirement which went up from 3% to 3.5% about a year ago and now buyers will have to come up with much more money in order to get the FHA mortgage. Home prices are no longer free falling but there are still too many short sales and real estate owned properties coming onto the market which artificially deflates the average purchase price. This trend will continue for another year or two before all the excess non-performing loans are taken out of the market place. A strong recovery will move into place when the amount of foreclosures and short sales start to trickle instead of flood the market. My prediction is that this will happen in the fourth quarter of 2011. Other areas of the country are already experiencing bidding wars on homes and a healthy level of price appreciation. It will take our tri-state area a little longer since our appreciation rates had been driven to unsustainable levels during the years of 2000 til 2005. I am still seeing good buyers getting very good deals on homes that they would never have been able to afford several years ago. The timing continues to be right for those buyers who are able to purchase now.

The end of the bottom is upon us....

Well I've been watching and waiting for some signs to signal that the end of the bottom is approaching and I have begun to see those signs. Foreclosures and short sales are still coming out on a daily basis but now they are being snatched up pretty quickly if they are good deals. Buyers are wading back into the market at a rapid pace and are no longer scared of their own shadows. The number of contracts being signed are up and the days on the market are down. In some "hot" areas where there is a lot of pent up buyer demand, the days on the market for the average well priced home is now below 30.

Mortgage financing is now the biggest obstacle that is still hindering a complete housing recovery since consumer confidence is slowly being restored. Banks are slightly beginning to loosen their vise-like grip on credit so we are seeing a slight uptick on closings. Rates are still very low but credit is still difficult to obtain. Buyers who have good credit, verifiable income and a down payment are really scoring some terrific deals in this market. Investors with cash are snapping up low priced deals and either fixing and flipping or holding as rentals for future appreciation.

My prediction is that the Metro NY housing market will be on the road to recovery as we hit 2010. Real price appreciation probably will not occur until 2012 but by then we will be heading into a strong seller's market again with home prices on the upswing and a strong decline in available inventory.

It's pretty tough out here

Well the good news is that many homes are selling for 50 to 60% of what they had sold for in 2005 to 2006. This really means that buyers have a lot of options available and they can now buy homes that were completely unavailable to them a mere 3 years ago. The other good news is that interest rates are insanely low, anywhere from 4.625% to 5.55% depending on the program, the down payment, the points, and your particular credit worthiness.

The bad news is that most banks are still looking for excuses as to why not lend to you. Buyers should do everything within their power to make themselves as mortgageable as possible since we have now reached what I call the "Perfect Storm" of Real Estate. We now have very low prices coupled with very low interest rates. This is an awesome time to buy if you can. Best of luck to all of you!

The Questionable Fairness of the Obama Stimulus Package

First the good news:

It's good to have a President that can assess a situation and move quickly to try to fix a known problem of enormous magnitude namely the Real Estate and Mortgage MESS. 

I am glad that many existing homeowners who have fallen on hard times will get the opportunity to remain in their homes because they now will be able to get their interest rates automatically reduced and may also get part of their loan balance forgiven. That sounds nice but it also reeks of a Giant Government "Gimme". What bothers me the most about this plan is that there is no way to separate the people who deserve a "hand up" with the people who are just getting a "Free ride".  I, personally witnessed many greedy home buyers who bought homes that far exceeded their current earning abilities yet they did so with impunity because the "System" in place was one of letting Capitalism run amok. It is the system still favored by NeoCon conservatives. Now don't get me wrong, there is something to be said for the market being able to self regulate itself based on overall profitablity coupled with supply and demand but the problem with greed is that it completely blinds all parties.

Now for the bad news:  Part of the "Stimulus Package" that the solid, fiscally conservative, law abiding, mortgage paying population will be paying for is the support of those same greedy people who felt that they deserved a "McMansion" complete with gunite pool and spa, yes folks, the very same people who had poor judgement in the first place.  

Let me make this very clear, I have a problem with bailing out greedy self indulgent people who shouldn't have bought what they bought in the first place!

I do not have a problem with people who, due to unfortunate circumstances such as health problems, the death of a loved one, a messy divorce or the loss of a job, end up needing a helping hand. These families need our help and I'm happy that the "Stimulus Package" will provide that "hand up".

In the past several months I have witnessed many good mortgage paying people unable to refinance their mortgage down to a lower rate because their equity has slipped away and lending regulations have gotten tighter than a tourniquet.  Our former Prez, Bush the 2nd, gave the banks billions and yet those very same banks suddenly won't lend to the very same people who have already proved that they can pay a mortgage on time. Now that is what I call UNFAIR.  If the government is so big on handing out billions where's my cut of the pie? Countless clients of mine can not refinance their mortgage to take advantage of the lower rates while countless numbers of people who haven't paid their mortgage in over a year are able to refinance with no closing costs into an outrageously low mortgage rate.  This is NOT FAIR. How about the government rewarding those people who did not contribute to the current mess? How about giving them a "Gold Star" and a means to participate in this giant government give-a-way? Anyone who has systematically paid their mortgage, on time, throughout this time in history, should get an automatic "Free Pass" that could be redeemed for at least a 1% interest rate reduction and maybe a cherry on the top which could be a $25,000 downward loan modification.  Now that would be a fitting way to reward people who did not contribute to the current mess we are in. What do you think folks?

Fundamentals are what count

I've been meaning to get this topic off of my chest for awhile so here it goes..... Everyone, including the papers, the pundits and now the politicians say we are in a bad economy, right? So why is it that when I call a company for service they don't get back to me or lose my information? I'll give you an example of this. I called a permit expediting company several months ago because I thought I needed professional help in legalizing a structure. I left not one but two messages w/the receptionist and I never received a call back. Here's another interesting story, I ordered an oil delivery for a home of mine that is tenant occupied and asked if I could purchase a service contract for said home. I was told that one of their service technicians would need to look the burner over before they would agree to give me a service contract to make sure that the burner had no real problems. I scheduled the appointment between the service technician and my tenant. I never received a follow up call to let me know if I would be eligible for a paid service contract. 6 Weeks later my tenant tells me that the heat just stopped working so I called back this company to schedule in a service call and they said that their service technician had no interest in fixing my burner even if I agreed to pay them in full for parts and labor. I was completely shocked that a company that is in the business of fixing oil burners had no interest in taking my money and fixing my heating equiptment.  I promptly called another oil delivery/service company and had my oil burner fixed w/in 4 hours at a total cost of $199. This excellent company is Taylor Fuel and I am now a grateful customer of theirs while the other company will be on my blacklist. What I really think is that good businesses have good fundamentals and some how they will weather the economic storm while businesses w/poor fundamentals will go out of business and it will not be the economy's fault it will be their own damn fault.

The same lesson can be applied to home buying. Fundamentals count. The reason we are in such a foreclosure mess is that the average home buyer threw fundamentals in the garbage. They just wanted what they wanted, when they wanted it, especially if their friend or cousin had it. I saw people get into bidding wars on 2 bedroom homes in so so locations. I saw buyers overlook their own inability to make a mortgage payment just so they could say they owned a home. 

Today's buyer is just plain afraid. They are afraid of making the same kind of mistakes that thousands before them made. They are afraid that they won't get mortgage financing. They are afraid that they will lose their jobs. I understand this fear however it was once said that "the only thing to fear is fear itself". Fear is there to make you think things through and not leap before you look which is a good and healthy thing. Fear that prevents you from making meaningful and positive decisions and choices is just baseless fear that paralyzes. Once you have analyzed a situation properly it is time to make a decision based on fundamentals and get on with it. Waiting for the sky to fall like "Chicken Little" is no way to live.