Tools for Recovery
by Lawrence Yun, NAR Chief Economist
Pending Home Sales: The Good and Bad
Pending sales have fallen in some areas of the country that are considered healthy. Seattle, Nashville, and Austin markets have experienced nice rates of home price appreciation and the prices year-to-date have continued to rise or have held. But higher home prices and the associated affordability problems have begun to hold back potential home buyers in these markets - despite their solid job growth.
But let's talk a minute about pending sales. While we generally assume that pending home sales "close" within 2 months of signing, "pending to closing" does not have a direct one-to-one relationship. There are several reasons for this. The sample coverage on pending sales (that is, the data sample on which NAR Research calculates the pending home sales index) is much smaller than that of actual closings as recorded in existing home sales. In addition, some contracts could "fall out," and consequently do not close (i.e., do not result in an actual sale and so do not show up in the home sales statistics). Furthermore, that traditional lag time of two months between contracts and closings may be rising.
Still, April's measure of pending home sales was a solid jump - and the first rise in the index since the beginning of the year. I am hopeful that this is the beginning of a momentum that can build and thus unleash chain reactions from some sellers now able to start buying trade-up homes. Remember: housing markets had been partly frozen because would-be repeat buyers could not purchase because they first needed to sell the homes they already owned.
The good news on pending sales in April was tempered by the latest inventory statistics.
Housing inventory rose to its second highest level ever with 4.55 million homes listed for sale - an 11.2 month supply at the current sales pace and an increase of 10.5 percent from the prior month (or by 434,000 units). Part of the rise in supply is due to a normal seasonal increase from March to April. More new inventory reached the market over these two months than in any other months. Even so, the high inventory levels are uncomfortable. It is also a signal to many home sellers to be more realistic about pricing to attract buyers. Unless you have those immaculate, unique home features, don't even bother listing if you are not going to concede on prices in today's market.
Because of high inventory, home prices are continuing to fall in most parts of the country. The national median existing home price in April was $202,300 -- an 8.0% decline from one year ago and the second largest price decline since NAR began tracking price data in 1968. It is important to note that some of the price declines are not genuine housing value declines; they just reflect the fact that more smaller-sized and lower-priced homes are being sold.
What's in Store
The up-tick in the latest pending sales will help existing home sales to be modestly higher in the second quarter of this year versus the first quarter. The sales in the third and fourth quarters are anticipated to be notably higher. There are several underlying reasons:
Removal of "declining market policy" by Fannie and Freddie. Fannie Mae and Freddie Mac had imposed a "declining market policy" of requiring a higher down payment and higher credit scores in lending in regions where prices had been falling. However, that policy exacerbated the downturn by reducing housing demand. Given that "Fan and Fred" were created with the mission of providing credit in times of crisis - they decided to do away with that policy beginning this month (June 2008). This is welcome news in terms of maintaining underwriting standards without going overboard in being too stringent.
Significant reduction in conforming jumbo mortgage rates. Another very positive development is in the falling mortgage rates on conforming jumbo rate loans recently. In spite of newly enacted legislation early in the year raising the loan limit, the mortgage rates on these higher loans did not fall. However, Fan and Fred have become very active in purchasing these loans and mortgage rates have fallen by a full one-percentage point - e.g., from 7.5 percent to 6.5 percent. That is a great news for homebuyers in high-cost regions. (The super jumbo non-conforming loans still carry very expensiveinterest rates.)
More applications for FHA loans by borrowers who would have been subprime borrowers this time last year. Since the summer of 2007, home sales were hampered by a sudden disappearanceof subprime loans. But FHA loan applications have been rising and I believe the FHA program will be able to bring some of the buyers who would have used subprime loans into government-backed loans that carry much lower interest rates.
Improving economy. The economy will see a growth of about 2 percent in the second half of this year. That will turn the job market to the positive side with net job gains possibly of 350,000 in the second half.
Home buyer tax credit. There is a better than 50-50 chance that the President will sign a big Housing bill from Congress before the 4th of July. The key element of the bill from my point of view is the temporary homebuyer tax credit. This tax credit will induce fence-sitters back into the marketplace.
Chain reaction buying. Many home sellers are not able to buy because they cannot sell their homes. However, there is always a bit of chain-reaction momentum that will build. An increase in buying unleashes existing sellers to buy the next home - and so forth.
As a result, I see improved sales in the second half of this year. Prices are more difficult to predict. More transactions have been occurring on the lower end. But we may begin to see more sales in the higher end with falling rates on conforming jumbo loans and from the chain-reaction factor.
Friday, June 27, 2008
Tuesday, June 17, 2008
Realty 101 - Hiring a Broker
We are going to cover some of the basic information about hiring a Real Estate Broker including how and how much they are paid and what services you can typically expect from them.
Broker - Client Relationships First of all, please be aware that in Colorado, Real Estate professionals must take coursework and pass a Licensing Exam in order to represent the public in the sale or purchase of Real Estate. Persons who pass this coursework and exam are referred to legally as “Brokers”. One can choose to work associated with a company, such as Remax (a Broker Associate) or own her own real estate company (Broker Owner).
Brokers are called Brokers because you can have one working for you and not have the benefit of an Agency relationship. In Colorado, when you are ready to hire a Broker, you will sign an employment contract with them that specifies whether the Broker will represent your interests alone in all matters (Agency); or whether the Broker is there merely to conduct the transaction on your behalf (Transaction-Brokerage). You pay the same negotiated fee regardless of the relationship you choose.
The Employment Agreements Brokers have a fine line they must walk until they have been hired by you. When you meet a Broker, you want to ask them questions, get information and learn all you can from them. Legally, Brokers must clarify several things before providing you with information and soliciting information about your interests. Before hiring a Broker, there are several agreements which must be presented and signed before they can solely represent you. You will find complete details of these forms at my website under Mile High Guide – Realty 101.
Help! Part of my Home's Equity is becoming a Broker's Paycheck! This is how it generally works: you find a professional Broker who has impressed you with her market knowledge and ability to market your property, you like her company and responsiveness and you have decided to enter into contract with her to sell your home. But you wonder why are you paying so much for her services? First, bear in mind that you are paying two Brokers. A listing Broker is the Broker you have hired to help valuate, market and represent your interests in the sale of your property. They will be conducting the analysis necessary to make sure your home is properly priced and will be involved with your overall pricing strategy, they will market your home - what "marketing" means varies tremendously between Brokers - they will keep you informed and negotiate on your behalf regarding the price and terms of sale. The listing Broker puts your goods on the sale shelf, so to speak.
The Selling Broker is the Buyer's Broker, who has been contracted by a completely different party, the Buyer, to find a home suitable to their tastes and price. When this Broker shows your home to her Buyer Client, and presents the Broker you hired with her client's offer for your home, she is the party who sold your home, should you ultimately accept the offer.
As a result, your listing Broker shares his commission with the buyer's Broker. Virtually all homes are ultimately sold by a Buyer's Broker, so they are very important people to you.
Second, commission generally comes from your home’s equity so that you don’t have to come up front with the funds to pay the Broker. She will be investing her own funds into the creation of marketing products and spending sometimes hundreds of hours getting everything ready and then communicating with other Brokers once the home is on the market. You wouldn’t expect someone to come clean your home or provide some service without paying them. You wouldn’t want to go to work for free yourself. The situation is set up for your convenience so that you can have expertise and marketing without paying up-front; and to give the Broker an incentive to complete her job as quickly as possible.
Let’s all be experts! For more information on any Real Estate subject, visit my website or give me a call at (720) 275-3926.
Broker - Client Relationships First of all, please be aware that in Colorado, Real Estate professionals must take coursework and pass a Licensing Exam in order to represent the public in the sale or purchase of Real Estate. Persons who pass this coursework and exam are referred to legally as “Brokers”. One can choose to work associated with a company, such as Remax (a Broker Associate) or own her own real estate company (Broker Owner).
Brokers are called Brokers because you can have one working for you and not have the benefit of an Agency relationship. In Colorado, when you are ready to hire a Broker, you will sign an employment contract with them that specifies whether the Broker will represent your interests alone in all matters (Agency); or whether the Broker is there merely to conduct the transaction on your behalf (Transaction-Brokerage). You pay the same negotiated fee regardless of the relationship you choose.
The Employment Agreements Brokers have a fine line they must walk until they have been hired by you. When you meet a Broker, you want to ask them questions, get information and learn all you can from them. Legally, Brokers must clarify several things before providing you with information and soliciting information about your interests. Before hiring a Broker, there are several agreements which must be presented and signed before they can solely represent you. You will find complete details of these forms at my website under Mile High Guide – Realty 101.
Help! Part of my Home's Equity is becoming a Broker's Paycheck! This is how it generally works: you find a professional Broker who has impressed you with her market knowledge and ability to market your property, you like her company and responsiveness and you have decided to enter into contract with her to sell your home. But you wonder why are you paying so much for her services? First, bear in mind that you are paying two Brokers. A listing Broker is the Broker you have hired to help valuate, market and represent your interests in the sale of your property. They will be conducting the analysis necessary to make sure your home is properly priced and will be involved with your overall pricing strategy, they will market your home - what "marketing" means varies tremendously between Brokers - they will keep you informed and negotiate on your behalf regarding the price and terms of sale. The listing Broker puts your goods on the sale shelf, so to speak.
The Selling Broker is the Buyer's Broker, who has been contracted by a completely different party, the Buyer, to find a home suitable to their tastes and price. When this Broker shows your home to her Buyer Client, and presents the Broker you hired with her client's offer for your home, she is the party who sold your home, should you ultimately accept the offer.
As a result, your listing Broker shares his commission with the buyer's Broker. Virtually all homes are ultimately sold by a Buyer's Broker, so they are very important people to you.
Second, commission generally comes from your home’s equity so that you don’t have to come up front with the funds to pay the Broker. She will be investing her own funds into the creation of marketing products and spending sometimes hundreds of hours getting everything ready and then communicating with other Brokers once the home is on the market. You wouldn’t expect someone to come clean your home or provide some service without paying them. You wouldn’t want to go to work for free yourself. The situation is set up for your convenience so that you can have expertise and marketing without paying up-front; and to give the Broker an incentive to complete her job as quickly as possible.
Let’s all be experts! For more information on any Real Estate subject, visit my website or give me a call at (720) 275-3926.
Friday, June 06, 2008
Housing Supply Declined in May
Housing Supply Declined in May
Ample Listings Remain in Market; A Sign of Leveling
By JAMES R. HAGERTY June 5, 2008 Wall Street Journal
The supply of homes available for sale in major metropolitan areas declined slightly in May.
Total listings of homes in 29 metro areas at the end of May edged down 0.3% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data cover listings of single-family homes, condos and town houses on local multiple-listing services in those areas, where Zip operates.
The inventory was up about 0.3% from May 2007 in 18 metro areas for which Zip has comparable year-earlier data.
The numbers are the latest sign that the supply of homes on the market is leveling off. But the supply remains ample. The National Association of Realtors recently said the number of single-family homes on the market in April was enough to last 10.7 months at the current sales rate. That was the highest since 1985. In the first half of this decade, when house prices were soaring, the supply typically was four to five months.
The figures from Zip and the Realtors probably understate the supply of homes because not all foreclosed properties that lenders are trying to sell are listed on multiple-listing services, said Thomas Lawler, a housing economist in Leesburg, Va.
Lenders and investors in mortgages owned 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to an estimate from First American CoreLogic. The April total works out to about one in seven previously occupied homes listed for sale nationwide.
Ample Listings Remain in Market; A Sign of Leveling
By JAMES R. HAGERTY June 5, 2008 Wall Street Journal
The supply of homes available for sale in major metropolitan areas declined slightly in May.
Total listings of homes in 29 metro areas at the end of May edged down 0.3% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data cover listings of single-family homes, condos and town houses on local multiple-listing services in those areas, where Zip operates.
The inventory was up about 0.3% from May 2007 in 18 metro areas for which Zip has comparable year-earlier data.
The numbers are the latest sign that the supply of homes on the market is leveling off. But the supply remains ample. The National Association of Realtors recently said the number of single-family homes on the market in April was enough to last 10.7 months at the current sales rate. That was the highest since 1985. In the first half of this decade, when house prices were soaring, the supply typically was four to five months.
The figures from Zip and the Realtors probably understate the supply of homes because not all foreclosed properties that lenders are trying to sell are listed on multiple-listing services, said Thomas Lawler, a housing economist in Leesburg, Va.
Lenders and investors in mortgages owned 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to an estimate from First American CoreLogic. The April total works out to about one in seven previously occupied homes listed for sale nationwide.
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