The next 14 days will provide what I feel is truly the “Perfect Storm” for anyone looking to buy a home.

We currently have: 1) Our Lender offering 3% of the purchase price to our Buyers for closing costs, 2) Northwest Natural Gas is offering a years worth of Natural Gas on any of the homes in the Ultimate Open House, 3) The Federal Home Buyer tax credit is still available, 4) Exceptionally low mortgage interest rates and 5) Great home values that have reset to 2002 in many areas. For instance:

1) On any Marnella Homes town homes in Volare, Golf Savings Bank is providing a Lender Credit of 3% of the Sale Price up to $20,000. This program has just been extended for sales agreements dated on or before the 1st of June, 2010 with closing dates on or before the 30th of July, 2010.
2) Northwest Natural Gas is offering a year of Natural Gas, up to $800, on our homes that we have presented in this years Ultimate Open House.
3) The Federal Home Buyer tax credit is available for qualified home buyers on transactions executed by the 30th of April, 2010 and closed by the 30th of June, 2010
4) We are seeing mortgage rates that are as low as our Grandparents took advantage of after World War II. These are rates that cannot be sustained at these low levels and will have to begin to rise.
5) Home values in some areas, like here in Happy Valley, have reset to 2002/2003 prices. If you are looking at homes under $300,000, these values have bottomed out and have shown signs of strengthening in many areas.

So, for anyone thinking about or actively looking to buy a home, the current conditions for home buying are such that we may never see again in our lifetime.

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For our potential first time home buyers out there, the $8000 Federal Housing Tax Credit that you are eligible for is coming to a close.  By the 1st of December 2009, only 3 months way, this tax credit will be no more.  However, due to the time necessary to close a home taking about 30 – 45 days, what this really means is that you will need to have your sales agreement accepted and in escrow by the 15th of October just to be safe.  Since you have only about a month and a half of shopping time left, don’t delay.  Take advantage of all that is available in the market place right now; historically low interest rates, home values that have reset in many markets to 2003/2004 prices and an $8000 government give-a-way.

Don’t be one of those who feels that the housing market has a long way to fall.  There is too much positive news coming out all over the country to counter that theory.  Remember, it only takes interest rates to move up a half of a percent to wipe out the benefit of a 10% drop in sales price.  With many markets identifying their bottoms already, waiting for deeper price cuts is a mistake that you will surely regret when the tax credit is gone and rates go up.  Which, they will.

Don’t miss out on what will be looked back upon as an opportunity of a lifetime for those willing to take advantage of it.

For frequently asked questions and more information on the Federal Housing Tax Credit refer to: http://www.federalhousingtaxcredit.com/2009/index.html

and

http://www.irs.gov/newsroom/article/0,,id=206291,00.html

Wow, what a week for housing news.  Whether this is a flash in the pan or it is truly a sign of more great things to come, we are encouraged by it either way.  Of course, our “glass half full” friends will discredit any of the many groups reporting this, but this shouldn’t be much of a surprise.  They will claim that this is just a normal seasonal increase.  It might be, but it is still an increase.  They will claim that the only reason for the increase in sales is due to the short sales, foreclosures and deep price reductions.  Doesn’t this still mean that people are buying again and lenders are still lending?  At the end of the day, sales are still up Month over Month.

 

There was a story from MarketWatch by Rex Nutting on Tuesday the 24th.  Mr. Nutting reports,  “U.S. Housing prices rose 1.7% in January compared to December, the Federal Housing Finance Agency reported on Tuesday. This was the first increase in a year.”  I feel this is big.  Bigger than an increase in sales.  Showing the possible signs that in some markets there is some bottoming being found.  Mr. Nutting goes on, “The “unexpected rise” in January was partially due to stronger sales in some markets, the FHFA said.”

 

For a viewing of the complete story, follow this link: http://tinyurl.com/de37e3

 

There was a MarketWatch news story by Stacey Delo on Wednesday the 25th.  She discusses with USC real estate economist Delores Conway this surprise in news in the Housing data.  Ms. Conway states that the reason for this increase is really a bit of both the lower prices and interest rates that have pushed sales up Month over Month.  Still acknowledging that sales are down compared to last year.  It noted that over half of the sales that have been reported are to first time home buyers.  This is due to the affordability being enhanced by historically low interest rates and lower prices.

 

To watch this entire story, please see the following link:  http://bit.ly/QSKf8

 

We had a CNN Money News report by Paul R. La Monica, on Wednesday the 25th, that talked about how Wall Street and the Housing Sector was very encouraged by this weeks results. This story reported; “The Commerce Department reported Wednesday that new-home sales rose almost 5% last month after hitting their lowest point ever in January. Economists were expecting a decline of about 3%

This comes on the heels of two reports showing a better-than-expected gain in existing-home sales and the first increase in construction of new homes since June.”

 

John Buckingham, fund manager said, “Clearly there is interest in homes. Whether it’s in foreclosure or not, there’s still a buyer. That helps put in a floor on prices and could boost confidence.”

 

To read this complete story, please see the following link: http://tinyurl.com/c4cxxq

 

There was also a story in Reuters by Lucia Mutikani on Wednesday the 25th.  Ms. Mutikani noted that in a Commerce Department report, ” Sales of newly built U.S. single-family homes rose at their fastest pace in 10 months in February, it said in another report.”

 

To read this complete story, please see the following link: http://tinyurl.com/cmsdpz

 

What is amazing is that these are just some of the reports out this week.  From many sources and from many perspectives, we are seeing some signs of improvement.  Most do feel that it is too early to tell if a recovery is process, but regardless of the reason, it is still good news and we will take it!

I wanted to post another entry about the Federal Tax Credit. When I first discussed this back in January, I mentioned the changes to the Federal Tax Credit that were being discussed at the time. Well, some of the changes did end up being made and with just 20 days until tax time, I felt I should visit this one more time.

If you are considering buying a home this year, take advantage of the Federal Housing Tax Credit. The Federal Tax credit is available to you for a purchase of your new home. The sooner you talk with a tax professional the sooner you can determine how much of the allowable $8000 is available to you. This amount was $7500 under the previous bill and had a requirement to be paid back within 15 years. In addition, the deadline was extended from June 30th, 2009 to September 1st, 2009. These changes were made through the last stimulus bill.

As I mentioned before, regardless of what form this Housing credit takes, the current form or modified with new changes, it is a great incentive to assist you in the purchase of your next home.

For more details and frequently asked questions about the Federal Tax Credit go to the following website: http://www.federalhousingtaxcredit.com

To put this in perspective, our town homes here at Volare in Happy Valley, start at $229,950. On a purchase, utilizing a FHA loan, the $8000 Tax Credit almost covers the $8048 necessary for the down payment. This would be almost like 100% financing with the government gifting you the $8000, with no requirement to pay it back.

Adding to this, at our meeting this week with our preferred lender from Wells Fargo, Matt stated that he was locking some buyers in at 4.5% and one of our own team just closed on a loan at 4.375%! These are mortgage rates that have never been seen before!

So, if you are considering buying a home, look into this as soon as possible. If you can purchase a home before you file your 2008 return you can claim this credit on your 2008 return. Just one of the many opportunities that exist in this housing market, right now!

For additional information on the current discussions about other tax credit changes, go to the following link: http://tinyurl.com/ddteb6

Wait or Buy?

February 14, 2009

I wanted to share these stories because they address multiple points of the housing market with great points in all the stories.

 

In the first story, “Five reasons to buy this year”, it discusses the affordability being the best since the index was created in 1970.  I completely support this.  I feel that we are seeing an affordability that we may never see in our life time again.

 

It also quotes, Duane Andrews CEO of Clear Capital, “You buy for a quality of life…don’t buy on speculation”.   He goes on to say, “I wouldn’t buy a home expecting the market to rebound quickly in the next 10 years.”  We have been telling people for some time that we are back in a traditional real estate market whereas you will be planning on living in your home for at least the next 5 -7 years.  So, buy something that you will truly be happy in, and enjoy in the years to come, not just a home that has a great price tag on it.  There is truly a difference in a great price and a great value.

 

To review the complete story and related stories see link below:

http://www.marketwatch.com/news/story/story.aspx?guid={01DA1B93-91D1-49E4-A1B1-0ACA9CE66FF4}

 

In the next story, “Five reasons not to buy a home this year”.  It refers to the concern over prices continuing to fall this year.  They might or will and in some markets there may still be more decline into late ’09 or early ’10.  However, anyone that actually thinks that they are going to time the bottom of this market is fooling themselves.  Plus, with only an increase of .5 percent in interest wiping out any savings a 10% decrease in value would realize.  I don’t see much value in fence sitting.  Especially, in the least hit areas like the Northwest, a home buyer will have more to loose than gain to wait out this market. 

 

It is quite possible that once we find the trough in this market, it probably isn’t going to be appreciating at a rapid pace.  However, rates can’t stay at the level they are for very long due to the threats of inflation.  So, even if we see modest gains in values, rates will go up and the affordability that we are realizing today will be gone.

 

I think these are all good points to consider in buying a home in the current market.  I think you need to look at all aspects of your own financial situation. Does your budget have the cushion to sustain surprises?  Do you feel comfortable with your job situation?  Any prudent competent person would consider these. 

 

This story quotes a renter that decided to rent because he wasn’t planning on staying in one place for more than 5 years. We discuss this with prospective home owners in our sales office on a regular basis.  Real estate is back to a long term traditional investment.

 

To review the complete story and related stories see link below:

http://www.marketwatch.com/news/story/story.aspx?guid={22185FBD-7F44-4A49-A604-A29D4225E122}

 

 All good points however, all come to the same conclusion, if you are considering buying a home that you will be in for longer than 5 years that is within your means, it is the time to buy.  I hope you will take the time to read these stories and come to your own conclusion.

Or anyone who has not owned a home in the last three years.  If you are considering buying a home this year, take advantage of the Federal Housing Tax Credit.  The Federal Tax credit is available to you for a purchase of your new home.  The sooner you talk with a tax professional the sooner you can determine how much of the allowable $7500 is available to you.  The great news is that there are possible revisions to the original Housing Stimulus measure of last year.  On Tuesday the House of Representatives passed H.R. 1 that removes the repayment requirement of the housing tax credit which currently has to be paid back within 15 years.  Also, on Tuesday the Senate Finance committee passed their version which eliminated the repayment requirement of the credit, but additionally extended the dead line from June 30th, 2009 to September 1st, 2009.  These changes are exciting and hopefully soon we will see what the final outcome is.  Regardless of what form this Housing credit takes, the current form or modified with these new changes, it is a great incentive to assist you in the purchase of your next home. 

 

For more details and frequently asked questions about the Federal Tax Credit go to the following website: http://www.federalhousingtaxcredit.com

 

To put this in perspective, our town homes here at Volare in Happy Valley, start at $229,950.  On a purchase, utilizing a FHA loan, the $7500 Tax Credit almost covers the $8048 necessary for the down payment.  This would be almost like 100% financing except the $7500 is interest free, if the requirement to repay doesn’t get removed with new legislation.

 

So, if you are considering buying a home, look into this as soon as possible.  If you can purchase a home before you file your 2008 return you can claim this credit on your 2008 return.  Just one of the many opportunities that exist in this housing market.

 

For additional information on the current Stimulus package and other tax changes go to the link below:

http://www.marketwatch.com/News/Story/Story.aspx?guid=e513d57088144f24b74650d2dbd0b235&siteid=nwhpf&sguid=pEra3NiK_Ea0EyuFa0GCYA

More great news out last week, “Mortgage rates fell below 5% for the first time ever!”.  In fact, borrowers are being locked into rates even below 4.75.  As I write this, rates have inched up a little, but these rates are still available under the right conditions.  This is what bank CD’s and Money Market accounts were paying.

 

See completed story: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b781E33BA-96DE-40EB-86A4-A48DBE686DA1%7d&siteid=nbih

 

To add to this, I was recently comparing recent sales of our town homes in our current new neighborhood in Happy Valley; Volare.  Our current sales are of similar prices to what attached homes were selling for here in 2004!  After reading this article from MarketWatch, I started looking at what the average 30 year mortgage rate was in 2004.  It was 5.96.

 

On a loan of $250,000 at today’s 4.75 that is a Principal and interest payment of $1,304.12.  If this were in 2004, with a property of the same value and loan amount at 5.96 the Principal and Interest payment would be $1,492.45.  To have the same monthly payment today as in 2004, a home buyer could afford a loan amount of about $285,000. This means that a home buyer can buy over 12% more home today than they could have bought in 2004.

 

As the article says, “Mortgage rates could remain low at least until the summer”.  We all know that these rates cannot stay this low for very long due to the concerns over inflation.  This just illustrates another great opportunity to buy into this market.  As was illustrated last February in the Time Magazine article, “Ignore the Headlines” that I discussed in August, with a 5% increase in rates a 10% drop in price is washed away.  All rates have to do is jump back over 5%, which they will, and what little drop in value we realize this year will be negated by the increase cost of money.

There will never be an opportunity to buy into real estate like we are seeing right now.  Like Warren Buffet says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”  This is a great time to be a consumer right now.  A consumer that is willing to buck the advice from the naysayers and the headlines.

 

Those that seize these opportunities will be all the wiser in the years to come. 

Ok, back to Real Estate.  My last entry was just something I had to get off my chest.

 

One of the things I want to discuss this month is financing.  The common perception is that home financing is difficult to obtain these days.  To be clear, it is hard to get a loan if you have a credit score of 520 or less, no money for a down payment and a debt to income ratio of greater than 50%.  Frankly, if this indicates your financial situation, I would advise you to hold off on buying a home and consider seeking out a financial counselor to help you improve your finances.

 

As a country and as individuals, we have lost sight of the importance of financial discipline and are now paying the price. This is our current reality.  Our lending criteria is, by some estimates, back to what they were in the mid ‘90s.  I was selling real estate then and we sold a lot of homes.  It is a lending criteria or discipline that we should have never ventured away from.  However, the stricter criteria still affords many people the opportunity to purchase a home.

 

A principle that was important to me as a Broker and is still one of our top company goals is facilitating home ownership.  We have always strived to build and create neighborhoods that are attainable and have lasting value.  And, we’ve worked hard to be as flexible as possible to assist our buyers in getting into our homes. Given the current financial climate we are experiencing, this has never been more important.  We have realized that the lending programs that assisted many unqualified buyers in the past have left out some much more qualified buyers today. 

 

Over the past few months, we have been researching what we can do to help those who may have the appropriate income and credit, but lack the down payment.  Or those who have the income and the down payment, but not the required credit score.  These people need assistance in the form of a financial advisor or credit repair counselor and most importantly, a Seller that understands how to help and is flexible enough to make the home buying opportunity a reality.

 

With that in mind, we have implemented the following assistance programs:

·         Marnella Homes hosts educational home buying seminars the last Wednesday of every month.

·         We allow deposits of earnest money over time so that the required down payment accrues with each deposit.

·         We have created a Lending partnership that brings financial consultation and credit management to our Buyers.

 

1)      Home Buyer Seminars.  In this climate, it is just as important for the first time home buyer, as it is for the seasoned investor, to know what is really happening in the lending world.  Every day we’re inundated with information from the news, Internet, word of mouth, etc. and it’s hard to really know what is fact or fiction.  To clear up misconceptions and educate buyers, we have been hosting these seminars 1:1 or in a group setting.  Our preferred lender from Wells Fargo provides great up-to-the-minute insight into what is happening in the market and how to overcome potential challenges.           

2)      Earnest Money Deposits.  This has been a great help for our Buyers who have the income, but not the down payment.  Especially, those who are renting.  Why continue to pay rent and pay someone else’s mortgage when you can apply that money to your own new home? We are allowing a qualified Buyer to move into one of our homes and make monthly installments of earnest money to accrue the required amount necessary to close.  Once the necessary monies are on deposit, they are able to close escrow.  All while enjoying their new community and investing in their very own home.

3)      Lending Partnership.  Wells Fargo’s partnership with us has created services that are not common in other mortgage companies.  This is a partnership that’s sole purpose is to help those who are interested in the opportunity to own a home and achieve that goal no matter how long it takes.  In most cases, if a buyer has the will, we will figure out a way.  What is now available to our buyers is a financial advisor who can map out the steps necessary to create a clear and attainable path to home ownership.  A credit manager is also on hand to help those with less than perfect credit work on cleaning it up to a score that will get them were they need to be.

 

The bottom line is that we are in this for the long haul.  Our motivation has always been to promote home ownership and assist in whatever way possible.  These are the things we are implementing now and we won’t stop here.  Because this market is ever-changing, our methods of assistance and the homes and communities that we build will change too.

Another great article that vindicates a lot of what many of us have been saying was written recently.  The Wall Street Journal published an article written by Cyril Moulle-Berteaux on the 6th of May.  This article nails it!

 

It states that April will show that it was the bottom of the housing decline.  We feel that in our sales offices and what we hear amongst our peers.  Buyers are starting to feel a bit more confident and are starting to revisit the housing market.  More positive news like this Wall Street Journal article and our local new channel 6 had a great story about the Portland housing market last week all help rebuild the confidence that has been lacking in our market place.  We still hear plenty of negative press, but we will always hear that.  When the market turns around then it will be bad press about how unaffordable it is.  Most of the naysayers won’t find anything positive no matter what direction the market goes.  However, for the rest of us it is improving.  Ever it be so slowly, it is improving.

 

One theory that I have heard before and was addressed very well in this article is the belief that prices must drop another 30% before we get back with where they’ve been historically.  However, the article reads; 

 

“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.”

 

The national trends that are mentioned in this article are being realized here in Portland as well. The article addresses the fact that home inventories have been falling over the past months.  Here in Portland, RMLS reported that we had 12.8 months of unsold inventory in January.  By March we were down to 9.1.  We have seen an increase back to 10.1 in April however; an increase in inventories is historically in line with this time of year.  We have seen a 6.8% increase in pending sales from March to April.  Of course, all that will be referenced by the naysayers in their blogs and stories is that sales are down from last year with no mention of the increase in sales month to month since December of last year.

 

The National Association of Realtors has also just reported that, “buying a house in the Portland metro area is once again affordable for a family earning the median income.”  All the more reason to get into this market now and stop listening to those who continue to say the sky is falling in spite of the facts that things are improving.

 

 

A link to the entire WSJ article is provided below:

http://online.wsj.com/article/SB121003604494869449.html

Real Estate values have traditionally doubled every 10 years or so.  This has been the case for many decades.  But with every change in the market, there are those who say the end is near. As I often tell people, get your eyes off your feet and look ahead down the road. Real Estate has and always will be a long-term investment.  If you were looking to buy and sell in 6 months, I would advise you to stay put.  However, that is not why you buy. Whatever happens in the next few months should not dictate a person’s decision regarding their next home. 

 

Three weeks ago The National Association of Realtors stated that they expect the national market will decline by an estimated 1.2% in 2008.  1.2%!  If this is not defining the bottom of the market or the near bottom I don’t what is.  Bear in mind, this is averaging the top metro areas like Charlotte, North Carolina and Portland, Oregon with the likes of Miami, Florida, Las Vegas, Nevada and Detroit, Michigan.   So, if the worst they are predicting is 1.2% percent, I think that’s a pretty good indicator of how these top markets are going to perform this year.

 

On a $300,000 sales price today, 1.2% is only a “possible” decline in value of $3600!  Is it really worth missing out on the buying opportunities today over $3600?  Not to mention that the interest rates have increased 1 full percent since the 3rd week of January, this year, to about 6.25%.  That alone should be getting the attention of prospective buyers.  That same house with a 90% LTV (Loan To Value) mortgage at today’s 6.25% interest rate would have a Principal & Interest (PI) payment of $1662.  If it were purchased back in January at 5.25% with the same purchase price and loan amount, the PI payment would be about $1491.  So, not buying that home over just the last 10 weeks would have cost you $171 a month or $2,052 a year.  I don’t need to do the exercise of what the same house would cost with a 1.2% drop in value and another .05% increase in rate.  I think you get the picture. The point is that if you wait to feel out this market, home prices could steady and sellers might become less willing to negotiate. 

 

Portland Monthly Magazine just published a great story about the local real estate market that vindicated a lot of what I’ve been saying.  They stated that, “Portland hasn’t seen a decline in real estate values since the mid-80’s and our average annual increase is typically under 10 percent.  As a result, even if our market does stumble, we won’t have nearly as far to fall as a place like California, where double-digit annual price increases have been replaced by similar decreases.”

 

Suffice it to say, our local market is fairly steady and any dips are far below those of the national average. Not to mention, it’s become a buyer’s market once again, which, if you looked at a graph, would be right in line with how the market works. If you’re looking at real estate as a long-term investment, don’t delay. There are excellent opportunities out there right now.