Keller Williams Realty’s Real Estate Market Update

This Month in Real Estate March 2010 Newsletter for U.S. Real Estate Market

Commentary:

 As the market continues to show shoots of recovery, experts believe that the roots will continue to grow. In his annual letter to the shareholders of Berkshire Hathaway, Warren Buffett said, “Within a year or so, residential housing problems should largely be behind us.”

After a steep run-up in prices during the first half of the decade, home values have readjusted back to normalized levels. Fixed mortgage rates are sitting near record lows and the number of homes available for sale is providing home buyers with more options. Also encouraging are indications that the high end of the housing market could begin moving again as luxury financing becomes more readily available. 

Despite high unemployment and looming foreclosures, experts maintain their expectations that the economy will grow in 2010, while the government carries on its search for solutions to help both troubled homeowners and the unemployed.

The Housing Market: 

Existing Home Sales

Existing home sales slowed in January. According to Lawrence Yun, NAR chief economist, this is mainly due to the lack of urgency with the extension and expansion of the first-time buyer tax credit in November. January sales of 5.05 million remain 12 percent above the 4.53 million-unit level last year.

Median Home Price

Existing-home price was $164,700 in January, 3.4 percent below December and unchanged from January 2009. Distressed homes, which accounted for 38 percent of sales last month, continue to skew prices downward as they typically are discounted in comparison with traditional homes.

Inventory

The supply of homes continued to shrink, falling 0.5 percent to 3.27 million, representing a 7.8-month supply at the current sales pace. Compared to a year ago, there are now 10 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.

Mortgage Rates

Mortgage rates edged above the 5 percent threshold during the week of February 25, but remained near historically low levels. As the Federal Reserve mortgage-backed securities purchase program is scheduled to run out at the end of March, the Fed has held the door open to extending it if the economy weakens.

Affordability

Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 14.1 percent.

 Sources: National Association of Realtors, Freddie Mac

Government Action:

 Jumbo Mortgages Begin to Thaw

 The cost of jumbo loans, often used to purchase luxury homes, shot up during the financial crisis because lenders steered clear of anything that could be considered somewhat risky. Plus jumbo loans are too large for the government to support through the Federal Housing Administration, Fannie Mae, or Freddie Mac. 

The good news:  The jumbo loan markets are beginning to unfreeze and return to normal.

The difference between interest rates on conventional loans and jumbo loans has decreased from higher levels seen last year.

In some cases, the down payment requirements are easing as well, but they often still depend on the level of borrowing – the more the mortgage, the higher the down payment percentage. In New York, mortgage professionals report the following common down payments:

Borrowers will still need a good credit score, typically at least 700, evidence of high income, and a sizable bank account. 

 Sources: Los Angeles Times, Inman News

Topics For Buyers & Sellers:

2009 Tax Tips

Tax time is coming up.  Don’t forget about the following benefits in 2009 for homeowners.  What’s deductable in itemized deductions for homeowners?

 1. Mortgage Interest

 2. Points – paid at closing if you purchased or possibly if you refinanced this year

 3. Mortgage Insurance Premiums

 4. Property Tax

 5. Energy Efficiency Credits – see IRS Form 5695 for qualifying projects

 6. Home Buyer Tax Credit  – see IRS Form 5405 to claim your credit if you qualify

Keller Williams Realty’s Real Estate Market Update

This Month in Real Estate Video Report for Canada Market – February 2010

This Month in Real Estate PowerPoint Report for Canada Market – February 2010

Commentary:

The resale housing market finished the year on a high note.  Strong demand in the second half of the year pushed annual sales for 2009 over 2008 levels. With the Bank of Canada’s continued commitment to leave the interest rate low, mortgage rates continue to be favorable for buyers. More sellers are also jumping back in the market.

The strength of the housing market has spurred discussion of a possible housing bubble throughout the second half of 2009.  CREA Chief Economist Gregory Klump points out, “The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons,” he said. “By the second half of 2010, price gains are likely to shrink significantly, since a year will have elapsed since the decline and rebound. Further expected increases in supply will also take some steam out of the market.”

Canadian Housing Market:

Home Sales

Existing-home sales activity reached 46,805 units, the highest level ever reached. This stands 72 percent above activity in December 2008 and is 78 percent above the decade low reached in January of 2009. Low interest rates, coupled with upbeat consumer confidence, continue to bolster national sales activity.

 Average Home Price

The national average home price reached was $337,410 in December, up 19 percent from the same month the previous year. This large year-over-year increase continues to reflect the sharp rebounding activity in Canada’s priciest markets. Record-level average prices in most regions are now driving the overall national average price to new heights.

 Inventory

Sales-to-Listings Ratio

Strong demand and average price gains are drawing more sellers back to the market. New listings rose 3.7 percent from December 2008, the first year-over-year gain in a year and are up 4.7 percent on a month-over-month basis to 71,201 units. This is the highest level on record for the month of December. Even with the uptick in new listings, the strong increase in housing demand continues to draw down inventories. Nationally, there were 4.1 months of inventory in December, the lowest level in more than two years. The sales-to-listings ratio was 66 percent, representing a strong seller’s market.

 Mortgage Rates

Average for: 25-Year Amortization, 5-Year Term

In January, the 5-year conventional mortgage rate remained unchanged at 5.49 percent, 0.3 percent lower than this time last year. As the Bank of Canada reiterates its commitment to hold its benchmark overnight lending rate steady at 0.25 percent until the end of the second quarter of 2010, and with the overall risk to the inflation outlook tilted low, it suggests that the Bank could leave rates unchanged even longer than expected.

Sources: Conference Board, The Canadian Real Estate Association, Royal Bank of Canada, Canadian Mortgage and Housing Corporation, Bank of Canada

Notable News:

World Economic Forum

Consumers have increased their consumption of domestic products, supporting the economy over the past several months, but they cannot continue to do so indefinitely without overextending themselves. As recovery picks up across the globe, eyes turn to other nations to import Canadian products. The condition of the economy will likely serve as an indicator of the amount of importing capacity those countries have.

The World Economic Forum’s most recent meeting in Switzerland showed an overall consensus of generalized recovery. 

The increasing U.S. GDP has spread optimism–particularly for Canada, as the United States is the number one importer of Canadian goods and materials. However, high levels of unemployment are expected to continue for some time. Asia, on the other hand, is now close to total recovery. China grew by nearly 9 percent in 2009.  However, the global economic condition will not truly stabilize until imbalances are addressed, policy makers say. The West has immense levels of debt juxtaposed against a huge savings rate in the East. The representative from China indicated they will focus on stimulating domestic consumption, but that it will be a process over several years. China imports many of its raw materials from Australia and Canada. 

Experts indicated that recovery, although sluggish, has grown deep enough roots that they now do not see a “double dip” recession. Growth in Canada will likely continue to depend on the world economic condition as the major economies begin to recover and hopefully increase their imports from Canada. 

Source: The Financial Post

“Good and Boring”

Canada’s financial system has been repeatedly touted as the best, and it is known as the only major western country whose banks did not need a bailout. An article by Nobel Prize-winning economist Paul Krugman summarizes what brought Canada to where it is compared to the United States from a banking perspective. 

•     Over the past decade, Canada and the U.S. experienced the same global
       environment.

•     The interest rates policy was very similar.

•     All of Canada’s banks are “too big to fail,” as only five dominate the market.

•     The major differences in Canada from the United States: 

      o   The independent Financial Consumer Agency that strictly regulated deceptive
      lending practices, including subprime

      o   Bank’s leverage was strictly monitored

      o   Securitization was limited

Another important factor not mentioned in the article is difference in attitudes about risk between the two countries. Canada is more risk adverse-from its consumers to its corporations, banks, and government. 

Source: The New York Times

Timely Topics:

Bidding War Tips for Buyers

According to a survey by Towers Perrin, half of the firms they interviewed froze salaries in 2009, but only 11 percent are expecting to in 2010. This is great news for your average consumer – they can now put the extra from the salary bump toward savings or spending on the many great opportunities with low interest rates, including a new home.

 1.Get preapproved for your loan. Know the uppermost limit of what you can borrow and keep in mind how much of that amount of that you are willing to spend. 

2.Do your homework on price. Ask your agent to pull a Comparative Market Analysis for the home before bidding that way you know where the home stands compared to the neighbors and a range of what the home is worth. 

3.Offer firm. The fewer contingencies and the cleaner the offer, the better the chance you have in winning a bidding war.

4.Inspect the home. Prepurchase home inspections should cost around 1 percent of the home’s asking price but could be money well spent if it uncovers a costly problem. 

5.Don’t get distracted. Buy the home based on what can’t easily be changed:  layout, location, size, etc. try not to get distracted by what can easily change, such as paint color and decor. 

6.Think uneven. Uneven offer prices can stand out from a round number. 

7.Revisit. Do you still feel the same on a second or third trip through the home? Potential buyers often notice different things if they view a home more than once. 

8.Sweeten the deal. If you can find out about the seller’s situation, for example their ideal closing date, offer to make it happen. This could also set you apart from the crowd. 

9.“Hide your hand.” Rather than offering all you can afford to, try to figure out what the highest bid you’re trying to beat would be and come in over that. 

10.Play devil’s advocate. It’s easy to get caught up in the excitement. Keep in mind what you want and need. Ask if this is the right home for you.

 Source: HGTV.ca

Frequently Asked Questions About KW:

What is The Keller Williams Realty Difference?

What is The Keller Williams Realty Economic Model?

What Are The Dozen Secrets Every Real Estate Agent Should Know?

How Do The KW Agent Commission and Profit Sharing Models Work?

How Do I Find An Approved Real Estate Licensing School Near Me?

Keller Williams Realty’s Real Estate Market Update

This Month in Real Estate Newsletter for U.S. Market – February 2010

Commentary:

January began the new decade with indications that the economy is beginning to gain traction. Real GDP grew by 2.2 percent in the third quarter of 2009 and preliminary signals point to a continued positive trend for the following quarter. GDP is a measure of total products and services produced by a country and indicates the health of the country’s economy. 

A dip in home sales in December was due in large part to timing.  First time buyers that would have liked to close in December but qualified for the tax credit bumped their timeline up in order to cash in.  News of the credit’s extension reached many of them after their plans to close in December were set.

Interest rates are back below 5% and home prices are up compared to last year. The government continues to attempt to minimize the impact of troubled homeowners by continuing to improve its foreclosure prevention program and  has also taken steps to help foreclosures buyers purchase faster.

Although the unemployment rate is expected to stay high as jobs increase modestly,  experts expect the economy to continue to grow in 2010. 

The Housing Market:

Existing Home Sales

After a rising surge for three straight months, existing home sales slowed in December after first-time buyers rushed to meet the original November tax credit deadline and evidenced by first timers accounting for 51% of sales in November compared to 43% in December. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, NAR chief economist. December sales of 5.45 million remain 15 percent above the 4.74 million-unit level last year.

Median Home Price

Existing-home price was $178,300 in December, 1.5 percent higher than December 2008 and 8.2 percent above its low in January 2009. It was the first year-over-year gain in median price since August 2007, attributable to an increase in the number of mid- to upper-priced homes in the sales.

Inventory

The supply of homes continued to shrink, falling 6.6 percent to 3.29 million, representing a 7.2-month supply at the current sales pace. Compared to a year ago, there are now 11 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.

Mortgage Rates

Mortgage rates have moved back to less than 5 percent, which have been categorized by industry experts like Freddie Mac chief economist Frank Nothaft as “near a record low.” This move that may help boost home loan demand and lend support to the housing market recovery. On January 28, the average 30-year fixed-rate mortgage was 4.98 percent.

Affordability

Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

FHA to Help New Foreclosures Sell Fast:

 FHA has announced it will lift the 90-day seasoning requirement for one year. The FHA ‘s 90-day “seasoning” provision requires that a home sold to an FHA buyer must be owned for at least 90 days by the seller before closing.  This is intended to prevent buyers from purchasing property from “flippers” at an overly inflated value. 

In the current climate, quickly selling foreclosures has risen in importance while the prominence of “flippers” has dramatically decreased. Acquiring, rehabbing, and reselling a foreclosure often takes fewer than 90 days. Banks have been reluctant to sell foreclosures to FHA buyers if they would need to push closing back to meet the FHA requirement. 

There are additional stipulations; for more, please visit the press release. 

Quickly moving foreclosures out of the bank’s hands and into those of home buyers is an important step in stabilizing home prices, neighborhoods, and communities leading toward a healthy housing market. 

Source: U.S. Department of Housing and Urban Development

Topics For Buyers and Sellers:

Price it Right

Sellers who listed their home at the price originally recommended by their agent sold it:

•38 days faster
•For 2.25% higher
•With 1 less price reduction
Compared to sellers who did not take their agent’s recommendation.

 Staging Stats

Compared to homes that were not staged, staged homes had:

•more showings
•a higher list-to-sell percentage

Other notable stats found include:

•Only 1 in 3 sellers staged their home, even with all the commonly accepted advantages of staging.
•Staging typically took between 2 – 6 hours to complete.
•Including the cost of a staging professional and items purchased or rented, staging cost an average of $523.
Although it has advantages at all price points, staging was also found to be particularly important for homes priced over $600,000.

Source: Keller Williams Realty Research Study

**VIDEO/PowerPoint for This Month in Real Estate for U.S. Market – February 2010**

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By: Twitter Buttons

This Month in Real Estate Video Report and PowerPoint for U.S. Market – February 2010

Each month, This Month in Real Estate provides expert opinion and analysis on real estate trends across North America. The aim of the consumer-oriented segments is to help Keller Williams Realty realtors combat the “doom and gloom” messages of the national print and television media with real information on the state of the real estate market.

This Month in Real Estate Video Report For U.S. – February 2010

This Month in Real Estate PowerPoint Report For U.S. – February 2010

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This Month in Real Estate PowerPoint Reports For January 2010 – U.S. and Canada Markets

This Month in Real Estate Video Reports For U.S. and Canada Markets – January 2010

First-Time Home Buyer Survey Results For Agents and Consumers

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‘Cutting Expenses & Hiring Good People Increased My Net By 50%’ – Audio Training From KW Agent Mountain