Predictions For Real Estate 2009
by REIDirectory.net
Last year was lackluster for real estate (to say the least). What is in store for 2009? It’s really anyone’s guess, but here are my thoughts and predictions for the real estate industry for ’09.
Inventory Will Drop: The real estate industry will see the average number of days a property stays on the market fall. By the end of the year, the real estate market should begin stabilizing.
The Credit Crisis Gets Relief – With government assistance and new oversights more money will enter the system. This should cause banks to ease their current, almost impossible to get, loan regulations making it easier to find qualified buyers and move inventory.
The Wait Is Over – Economic conditions deteriorated in 2008 and forced many buyers and sellers to push back their real estate plans. The Bailout Plan will help ease consumer concerns and get the inventory moving.
Finding an area with appreciation potential
Some real estate experts believe that home buyers who purchase a house during the current market will gain equity if they stay in the house for at least five years and purchase in a desirable neighborhood.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Neighborhoods with strong employment bases, such as hospitals, universities, and government, tend to be recession-proof. People desire to live near their jobs, so housing that is in close proximity to these types of industries are generally in higher demand than those in other areas.
• High gas prices and roadway congestion have led many people to seek “walkable” communities – neighborhoods that offer both daily needs such as grocery stores and coffee shops to more specialty items like hair salons, all within walking distance. Walkable communities also provide public transportation, which is becoming more desirable to many home buyers and is increasing demand for housing in these areas. One Web site, walkscore.com, calculates the walkability of a community by locating stores, restaurants, schools, parks, and other attractions that are within walking distance. The scores are based on a 100-point scale with 100 points being a “walker’s paradise.”
• Home buyers who seek a new or nearly-new home should search in areas where the homebuilder is known for honoring warranties and building high-quality homes that are structurally sound. Homes in these areas are more likely to weather well and gain value in the future than homes in areas where the homebuilder is unknown.
• Homes in neighborhoods with sales momentum generally appreciate at a faster pace than areas where sales are flat. Some real estate industry consultants advise clients to pay close attention to the “list to sale” numbers, which reflect the difference between the asking price and the final closing price. Usually, if the gap in list-to-sale numbers is narrow, then the real estate market in that area is improving.
To read the full story, please click here:
http://www.chicagotribune.com/classified/realestate/advice/chi-select-neighborhood_chomes_1oct31,0,5272949.story
Should you buy a home now?
Thursday, August 07, 2008
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
With home prices in California declining by 37.7 percent in June compared with a year ago, some consumers are wondering if now is the right time to purchase a home, or if they should wait for prices to stabilize. Some real estate experts believe that home prices will continue to decline and that buyers should wait, while others recommend that home buyers take factors other than price into consideration, such as the benefits of owning versus renting.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Consumers who are hesitant about purchasing a home today because they fear price depreciation, need to understand that real estate is cyclical and that prices will increase again. Home buyers should view a house as a long-term investment and not be fixated on short-term prices. Some economists believe that consumers should purchase a house if they plan to live in or hold the property for at least seven years. This will allow the market to stabilize and homeowners to possibly profit from their investment, if they decide to sell.
· Although a typical monthly mortgage is higher than a rent payment, home buyers who qualify for a fixed-rate mortgage, such as those backed by the Federal Housing Administration, will have consistent monthly payments, while renters are generally subjected to annual rent increases. Mortgages also can be paid off and the house can be owned free and clear, while renters will consistently have a monthly payment.
· To help home buyers lower the financial risk of homeownership, experts recommend that consumers purchase a home within their means and have enough in savings or other assets to cover the mortgage payment for at least six months if they lose their job.
New report had optimistic prospects
Sunday, June 29, 2008 @ 2:23:00 PM
By Alexis McGee, Co-Founder and President of ForeclosureS.com is both architect and teacher of their exclusive investor learning programs and author of The ForeclosureS.com Guide books (Wiley 2007, 2008).
FREE! Don’t Miss Out – New Foreclosure Investor Webinar & Conference Call – “Make Honest and Ethical Profits Now!” LIVE Wednesday, June 18th, 2008, 6pm Pacific (9pm Eastern). Regularly $19 — NOW FREE! Hurry Space is LIMITED! MORE HERE.
A new report from Harvard just came out “The State of the Nations Housing 2008″ that I found very interesting. Let me share the highlights with you here. Starting with the good news — drastic production cuts and deep price discounts in 2005-2007 helped shrink the inventory of unsold new homes from a mid-2006 peak of more than 570,000 to less than 500,000 in early 2008. But the number of homes entering foreclosure nearly doubled to 1.3 million last year, and vacant homes for sale rose 46 percent over two years, to 2.12 million.
This report is more optimistic about medium- to long-term prospects. It estimates that unless there’s a serious, prolonged economic decline or a marked cutback in immigration, the nation will gain 14.4 million new households between 2010 and 2020, compared with 12.6 million between 1995 and 2005.
“Until the number of vacant for-sale units on the market falls enough to bring vacancy rates back down, house prices will remain under pressure,” the report says. “Working off the oversupply will require some combination of the following: housing starts fall even further; prices decline enough to bring out new bargain-seeking buyers; interest rates drop enough to improve affordability; job growth improves; consumer confidence returns; and mortgage credit again becomes more widely available.”
“At some point demand will bounce back,” Retsinas said in a press release announcing the release of the report. “Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability.”
If the economy slips into a severe recession, the prolonged contraction could drive down the sustainable level of housing demand by slowing the loss of older units, forcing more households to double up, and reducing sales of second homes, the report said. But in the case of a mild downturn, which most economists expect, the fundamentals of demand are likely to drive a strong rebound in housing once prices bottom out and the economy begins to recover.
The boom-bust housing cycle has been reflected in the home-ownership rate. From 1994 to 2004, the home-ownership rate surged by five percentage points, peaking at 69 percent. Since then, home-ownership rates have fallen back for most groups, including a nearly two-point drop among black households and a 1.4-point drop among young households. The number of renter households increased by more than 2 million from 2004 to 2007, lowering the national home-ownership rate to 68.1 percent.
Once the oversupply of housing is worked off and home prices start to recover, the use of automated underwriting tools, a return to more traditional mortgage products, and the strength of underlying demand should put the number of homeowners back on the rise, the report said.
Although the short-term prospects for a recovery remain uncertain, in the long run the downturn is unlikely to slow down the creation of new households. The report projected that minority household growth among 35- to 64-year-olds should remain strong in 2010-2020, while the number of white middle-aged households will begin to decline after 2010 as baby boomers reach retirement age. People living alone are expected to account for 36 percent of household growth between 2010 and 2020, and 75 percent of the 5.3 million projected increase in single-person households will be among those 65 and older.
This is all really very helpful information — if you know how to use it to buy low and sell for profits in today market. That is why I spend time on this and more economic and housing data every month in my FREE Webinar and Conference Call for new foreclosure buyers “Make Honest and Ethical Foreclosure Profits NOW” on July 16th at 6pm Pacific. Register Early as we always fill up quickly! MORE HERE.
The Truth about Making Money in Today’s Real Estate Market
We would like to offer a complimentary real estate seminar (a $99 value) as a benefit to the employees at your company.
We would like to share our experience and knowledge to teach people how to make educated decisions about buying, selling and investing in today’s real estate market.
There is no obligation to buy anything. We are not selling products or services. Our mission is to educate and provide guidance with honesty and integrity for people who may be overwhelmed, doubtful or indecisive due to misleading messages in the media about local real estate. For example, did you know there are areas in Los Angeles county that have appreciated over the last year?
As realtors and members of the California Association of Realtors (CAR) and National Association of Realtors (NAR) we will discuss the facts not the hype. Topics will include:
• Last Market Crash
• Best Buying Opportunity in 35 years
• Where are the Deals?
• Why Should You Buy in Today’s Market?
• Why Should You Sell in Today’s Market?
• What You Should Know Before Buying?
• Incentives, Discounts, Promotions
• Ideas to Get a Down Payment
• How Does the Process Work?
Call us now!
Best Hollywood Homes Team & Promenade Realtors
http://www.BestHollywoodHomes.com
Email Igor Korosec
Gayle Barnes
Keller Williams Realty Sunset
Commercial Market Follows Residential Footsteps
Posted by Editor View profile
There is a rise in commercial real estate being defaulted on and returned to lenders just as we have seen in the residential markets. The defaults are caused by property values falling below the amount owed on the property. See article » http://www.smartbrief.com
SoCal home sales jump in April but still lag year-ago period
Southern California homebuyers stepped off the sidelines in April, snatching up foreclosures and homes priced under $500,000 at a rate that was 22 percent higher than in March but down 19 percent from April 2007 and the lowest level since 1995, according to DataQuick Information Services.
MAKING SENSE OF THE STORY FOR CONSUMERS
The median home price for the six-county region was $385,000, unchanged from March but down 24 percent from an April 2007 peak of $505,000. April marked the first time in eight months that the median price did not decline.
Sales were strongest in areas hit hardest by foreclosures: Riverside County (where sales increased month to month for the first time in two years), Lancaster, Chula Vista, Anaheim, Lake Forest and Victorville experienced the strongest rebounds. Two-thirds of homes sold during the month in Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego counties were priced under $500,000. About 38 percent of the homes sold were in foreclosure at some point during the previous year, up only 2 percent from March but sharply higher than the 5 percent reported a year ago. In Riverside County, 53 percent of sales involved troubled properties.
The credit crunch, potential for a recession, and uncertainty over when foreclosures will peak caused DataQuick analysts to remain cautious. Lack of financing for high-value homes continues to be an issue and could forestall a recovery if the trend persists. In April, only 15 percent of Southern California home loans were above $417,000, down sharply from the same period a year ago.
To read the full story, please click here:
http://ap.google.com/article/ALeqM5h_DkmV9N0qyf2vfd5bqwsVnBh0JgD90OUO9G0
Mortgage Market Review
Provided to you Exclusively by President of The OCD Group Inc. Ernest Tepman
Last Week in Review
“TALENT WITHOUT DISCIPLINE IS LIKE AN OCTOPUS ON ROLLER SKATES. THERE’S PLENTY OF MOVEMENT, BUT YOU NEVER KNOW IF IT’S GOING TO BE FORWARD, BACKWARD, OR SIDEWAYS.” H Jackson Brown Jr. And just like that strange visual of an octopus on skates, so goes the volatile Bond market in recent days – and last week, Bonds and home loan rates skated around, but ultimately closed out the week very close to where they had begun.
Bonds and home loan rates ended the week on a sour note, but had spent the early part of the week moving sideways and slightly higher on a blend of mixed economic news and action in the Stock market. Grim news arrived from insurance giant American International Group (AIG), who reported an enormous first-quarter loss of $7.81 Billion or $3.09 a share, compared with earnings of $4.13 Billion just a year ago. The important part of this loss is due to write-downs on Mortgage Bonds, which tells us that the credit crisis is not yet entirely behind us. On these negative headlines, Stocks moved lower and money flowed over into Bonds, helping home loan rates improve.
By Thursday, Bonds were looking good and holding their ground above several floors of technical support, as the weekly Initial Jobless Claims numbers were reported at 365,000, slightly below expectations of 375,000. The more closely watched four-week average of Claims edged higher to 367,500. This not-so-hot read on the labor market helped Bonds and home loan rates continue to improve.
But then on Friday, Bonds gave back some gains on news of oil hitting $126 per barrel – and the inflationary effects of high oil prices is bad news for both Stocks and Bonds. Oil prices are reaching exceptionally high levels, and may get higher still. Read on for where oil prices are forecast to go in the future – and what it means for home loan rates.
AND IT’S NOT JUST FILLING UP THE TANK WHERE YOU’RE SEEING PRICE INCREASES…IT’S WHEN FILLING UP YOUR BELLY AS WELL! THAT’S RIGHT, FOOD AND DRINK PRICES ARE ON THE RISE IN A BIG WAY. CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR SOME MONEY-SAVING TIPS!
Forecast for the Week
After last week’s thin economic calendar, where Stock market action and technical factors had a big impact on Bonds and home loan rates, this coming week brings a much juicier economic report agenda.
Retail Sales for April will be reported on Tuesday, followed by Wednesday’s Consumer Price Index (CPI). This widely watched measure of consumer inflation will take special significance, now that the Fed has signaled their current rate cutting cycle may be at an end. On Thursday comes a read on the new construction housing market, with Housing Starts and Building Permits. We will have to see if these reports can keep Bonds above their 50- and 100-Day Moving Averages…as seen in the chart below. If the reports are economically weak or negative, Bond prices and home loan rates should hold their ground, and perhaps even find some improvement.
Remember when Bond prices move higher, home loan rates move lower…and vice versa. And right now, there’s an important story breaking that will be very important to stay tuned in to. Last Friday, oil prices reached a lofty $126 a barrel, and Goldman Sachs is forecasting that black gold could rise even higher, perhaps as high as $150 – $200 a barrel in the next twelve months. If they are right, the inflationary effects of high oil prices could pressure Bond prices to move lower, causing home loan rates to move higher. This will be a story to watch carefully in the days and months ahead.
The Mortgage Market View…
RISING PRICES NOT JUST AT THE GAS PUMP…
If you’ve noticed your grocery bill getting bigger lately, you’re not alone – and it’s likely not because you’re eating more. According to Rising Food Prices: Policy Options and World Bank Response, global wheat prices have increased a whopping 181% over the past three years – and overall, food prices have increased by 83%!
Concerned? You’re not alone. A recent poll showed that 73% of consumers cite higher grocery bills as a concern; with nearly half saying food inflation has caused a hardship for their households. In fact, food prices ranked just below record-high gasoline prices on the list of things people are worried about.
According to Gregory Karp, author of Living Rich by Spending Smart, here are three simple ways you can save when it comes to food and drink prices:
Time your grocery shopping. With the exception of milk, eggs, and bread, most grocery store products are put on sale at least once every 12 weeks, as Karp notes, often for “20%-30% their usual price.” So instead of buying what you need every week or two, stock up on non-perishables when they go on sale. It may take a little planning ahead on your part, but the annual savings is substantial. As Karp writes, “The average American family of four spends about $8,500 on groceries each year. Trimming that bill by 20% saves $1,700.”
Make eating out a special treat. Enjoying a nice meal out is always a fun thing to do, so let it be just that, a fun thing to do rather than a solution for being too tired or too rushed to cook. When you do have the time and energy to cook, make two or three times the amount and freeze the extras. Then, when you’re rushed, a home-cooked (and probably healthier) meal will be waiting in your freezer, and will likely take less time to reheat than a night out or take-out delivery. And you will save more than time: According to Karp, “A restaurant meal for two costs $30 even at inexpensive chain restaurants. Home-cooked meals typically cost half as much, if not less. Convert two restaurant trips into two frozen homemade dinners each month, and you will save $360 per year.”
Don’t buy bottled water. Believe it or not, recent tests have shown that bottled water and tap water are pretty equal when it comes to safety and taste. For example, ABC News tested New York City tap water and bottled water for bacteria and found no difference in purity. Plus, there are environmental benefits of using less plastic. Karp estimates that people who drink one $6 case of bottled water each week can save $311 per year if they stop buying bottled water. He notes that “tap water costs five cents per gallon, or less than two cents per equivalent case – about $1 for the year.”
Hey, if you eat…rising food prices impact you. Use the above tips and suggestions to help minimize your concerns about rising food prices, and stay healthy and smart.
The Week’s Economic Indicator Calendar
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Ernest Tepman
President
The OCD Group Inc.
Los Angeles: 800-963-4623
San Diego: 877-863-4623
E-Mail: marketupdate@theocdgroup.com
The Housing Crisis Is Over
From The Wall Street Journal
By CYRIL MOULLE-BERTEAUX May 6, 2008; Page A23
The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.
How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.
Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.
Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.
The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.
Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.
Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.
The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.
In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.
The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in “months of supply” terms. That’s the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.
Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.
Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.
Many pundits claim that house prices need to fall another 30% to bring them back in line with where they’ve been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.
Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.
This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.
When the rate of house-price declines halves, there will be a wholesale shift in markets’ perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.
More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.
A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets’ perception of risk related to housing, the financial system, and the economy.
We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.
