WASHINGTON – Dec. 2, 2011 – The average rate on the 30-year fixed mortgage hovered above its record low for a fifth straight week. Despite the great opportunity, few have the means or stomach to buy or refinance in the depressed housing market.
Freddie Mac said Thursday the rate on the 30-year home loan rose slightly to 4 percent from 3.98 percent the week before. Eight weeks ago, it dropped to a record low of 3.94, according to the National Bureau of Economic Research.
The average rate on the 15-year fixed mortgage was unchanged at 3.30 percent. Eight weeks ago, it too hit a record low of 3.26 percent.
Rates have been below 5 percent for all but two weeks this year. Yet this year could be the worst for home sales in 14 years.
Mortgage rates track the yield on the 10-year Treasury note. The yield rose this week after investors, encouraged by central banks’ joint effort to ease lending standards, shifted their money into stocks. Treasury yields rise when buying activity decreases.
Low mortgage rates haven’t translated into higher home sales. Mortgage applications have dropped over the past few weeks, according to the Mortgage Bankers Association.
High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many Americans don’t want to sink money into a home that could lose value over the next three to four years. And most homeowners who can afford to refinance already have.
The low rates have caused a modest boom in refinancing, but that benefit might be wearing off. Most people who can afford to refinance have already locked in rates below 5 percent.
The average rates don’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for the 30-year was unchanged at 0.7 and 15-year fixed mortgages rose from 0.7 to 0.8.
The average rate on the five-year adjustable loan ticked down to 2.90 percent from 2.91 percent. The average rate on the one-year adjustable loan also fell, declining to 2.78 percent from 2.79 percent.
The average fees on the five-year and one-year adjustable loans were unchanged from 0.6.
For more information visit:
Friday, December 2, 2011
Thursday, November 17, 2011
Tuesday, November 1, 2011
$500,000 Home Purchase comes with Residency Visa
Newly-proposed legislation that would grant resident visas to international buyers who spend at least $500,000 in cash on residential properties in the U.S. is one of the most intriguing ideas we’ve heard to help shore-up the nation’s hardest hit housing markets. The concept is part of a broader immigration package aimed at boosting foreign travel and investment in the U.S.
The bill, entitled The Visa Improvements to Stimulate International Tourism to the United States of America Act (or VISIT-USA Act), shows early signs of bi-partisan support; with it’s co-sponsors, Senators Mike Lee (R-Utah) and Charles Schumer (D-N.Y.), representing each side of the political spectrum.
Foreign buyers—particularly from Canada and Great Britain—have a strong propensity for purchasing vacation homes in Southwest Florida. Basically, the only thing preventing more of them from cashing-in on today’s reduced home prices are the restriction that typically reduces their annual stay in the U.S to the equivalent of six months—usually in 90 day increments. This bill bets that by removing this restriction baby boomers from around the world will join their U.S counterparts in retiring to Florida—with much of their accumulated wealth in tow.
The legislation proposes a three-year residential visa for foreign nationals who invest no less than $500,000 in residential real estate in the U.S. A minimum of $250,000 must be spent on a primary residence where the visa holder is required to reside for at least 180 days each year while faithfully paying U.S. taxes. The balance—or more—can be spent on other residential properties, which can be rented out. Moreover, buyers must pay in cash; thus placing no additional burden on our already stressed-out financial system.
Applicants will remain subject to the rigorous criminal and national security background checks that have been significantly enhanced in our post-9/11 world. Those with criminal records, suspected ties to terrorist organizations or drug cartels and other troublesome activities will be barred from qualifying. Once approved, applicants will not be eligible for such government benefits as Medicare, Medicaid, and Social Security. Essentially, the legislation creates an extended travel visa that will last for three years at a time, be subject to a strict renewal process; and not allow its recipients to obtain an American job or enter the path to citizenship.
Several of the bill’s tenets are specifically written to smooth the way for Canadian buyers. Presently, Canadians without a visa are not permitted to remain in the United States for more than 180 days annually, though many would undoubtedly retire here year-round if they could legally do so. Thus far in 2011, 25% of all international buyers in the U.S. came from Canada. That percentage is even greater in Florida where 39% of this year’s international home buyers have been Canadian—up 3% from last year.
The VISIT-USA Act doesn’t venture into unfamiliar territory hoping to create a market that doesn’t already exist. For the 12 months ending in March, sales to foreign buyers totaled $82 billion, up from $66 billion in 2010, according to the National Association of REALTORS®.
For Southwest Florida, where a real estate recovery has already taken hold in the lower price ranges, this legislation exactly targets the segment of our market that remains stubbornly weak: Homes priced from $500,000. Above that, there’s no spending limit.
“This is a way to create more demand without costing the federal government a nickel,” said Senator Schumer. “Our housing market will never begin a true recovery as long as our housing stock so greatly exceeds demand. This is not a cure-all, but it could be part of the solution.”
Its purpose, adds Senator Lee, is “to support a free market method of increasing demand for housing at a time when so many working-class Americans are underwater on their homes, are desperate for prices to rise again, and big-government programs have failed to work.” With the pundits agreeing that the speed of our overall economic recovery truly hinges on the pace of housing’s recovery, that’s a sentiment that people of every political and economic persuasion can get behind. Unless the bill ends up larded with too many pork barrel earmarks, we see very little downside to this legislation and look forward to tracking its progress through Congress.
The bill, entitled The Visa Improvements to Stimulate International Tourism to the United States of America Act (or VISIT-USA Act), shows early signs of bi-partisan support; with it’s co-sponsors, Senators Mike Lee (R-Utah) and Charles Schumer (D-N.Y.), representing each side of the political spectrum.
Foreign buyers—particularly from Canada and Great Britain—have a strong propensity for purchasing vacation homes in Southwest Florida. Basically, the only thing preventing more of them from cashing-in on today’s reduced home prices are the restriction that typically reduces their annual stay in the U.S to the equivalent of six months—usually in 90 day increments. This bill bets that by removing this restriction baby boomers from around the world will join their U.S counterparts in retiring to Florida—with much of their accumulated wealth in tow.
The legislation proposes a three-year residential visa for foreign nationals who invest no less than $500,000 in residential real estate in the U.S. A minimum of $250,000 must be spent on a primary residence where the visa holder is required to reside for at least 180 days each year while faithfully paying U.S. taxes. The balance—or more—can be spent on other residential properties, which can be rented out. Moreover, buyers must pay in cash; thus placing no additional burden on our already stressed-out financial system.
Applicants will remain subject to the rigorous criminal and national security background checks that have been significantly enhanced in our post-9/11 world. Those with criminal records, suspected ties to terrorist organizations or drug cartels and other troublesome activities will be barred from qualifying. Once approved, applicants will not be eligible for such government benefits as Medicare, Medicaid, and Social Security. Essentially, the legislation creates an extended travel visa that will last for three years at a time, be subject to a strict renewal process; and not allow its recipients to obtain an American job or enter the path to citizenship.
Several of the bill’s tenets are specifically written to smooth the way for Canadian buyers. Presently, Canadians without a visa are not permitted to remain in the United States for more than 180 days annually, though many would undoubtedly retire here year-round if they could legally do so. Thus far in 2011, 25% of all international buyers in the U.S. came from Canada. That percentage is even greater in Florida where 39% of this year’s international home buyers have been Canadian—up 3% from last year.
The VISIT-USA Act doesn’t venture into unfamiliar territory hoping to create a market that doesn’t already exist. For the 12 months ending in March, sales to foreign buyers totaled $82 billion, up from $66 billion in 2010, according to the National Association of REALTORS®.
For Southwest Florida, where a real estate recovery has already taken hold in the lower price ranges, this legislation exactly targets the segment of our market that remains stubbornly weak: Homes priced from $500,000. Above that, there’s no spending limit.
“This is a way to create more demand without costing the federal government a nickel,” said Senator Schumer. “Our housing market will never begin a true recovery as long as our housing stock so greatly exceeds demand. This is not a cure-all, but it could be part of the solution.”
Its purpose, adds Senator Lee, is “to support a free market method of increasing demand for housing at a time when so many working-class Americans are underwater on their homes, are desperate for prices to rise again, and big-government programs have failed to work.” With the pundits agreeing that the speed of our overall economic recovery truly hinges on the pace of housing’s recovery, that’s a sentiment that people of every political and economic persuasion can get behind. Unless the bill ends up larded with too many pork barrel earmarks, we see very little downside to this legislation and look forward to tracking its progress through Congress.
Visit my website at: http://www.JayNadelson.com
Monday, October 31, 2011
5 Homebuyying Myths
Overall, today’s homebuyers tend to be fairly knowledgeable about the real estate market, but there are still a few points of confusion in the process, especially for buyers just entering the market. Here are the five main areas of confusion found in a survey by Zillow:
• Appreciation: About 42 percent of homebuyers believe home values will appreciate by 7 percent a year. Reality: Historically, home values in a normal market appreciate by 2 to 5 percent in a year.
• Appraisals: 56 percent of the buyers said the purpose of the appraisal was to determine if a home was in good condition. Reality: That’s the purpose of a home inspection; an appraisal estimates fair market value.
• Homeowner’s insurance: 37 percent of homebuyers think that buying homeowner’s insurance is optional. Reality: Lenders require homebuyers to purchase homeowner’s insurance if they carry a mortgage.
• Ownership: 47 percent of homebuyers said a prospective buyer owns a home after the purchase contract is signed by the seller – when the two parties reach agreement. Reality: The purchase and sales agreement is the beginning of the closing phase, but it can be a long process until they finally take ownership.
• Mortgage insurance: 41 percent of buyers think they must purchase private mortgage insurance, regardless of the amount of their downpayment. Reality: Buyers only need to purchase PMI if their downpayment is less than 20 percent of the home’s purchase price.
• Appreciation: About 42 percent of homebuyers believe home values will appreciate by 7 percent a year. Reality: Historically, home values in a normal market appreciate by 2 to 5 percent in a year.
• Appraisals: 56 percent of the buyers said the purpose of the appraisal was to determine if a home was in good condition. Reality: That’s the purpose of a home inspection; an appraisal estimates fair market value.
• Homeowner’s insurance: 37 percent of homebuyers think that buying homeowner’s insurance is optional. Reality: Lenders require homebuyers to purchase homeowner’s insurance if they carry a mortgage.
• Ownership: 47 percent of homebuyers said a prospective buyer owns a home after the purchase contract is signed by the seller – when the two parties reach agreement. Reality: The purchase and sales agreement is the beginning of the closing phase, but it can be a long process until they finally take ownership.
• Mortgage insurance: 41 percent of buyers think they must purchase private mortgage insurance, regardless of the amount of their downpayment. Reality: Buyers only need to purchase PMI if their downpayment is less than 20 percent of the home’s purchase price.
Visit my website at: http://www.JayNadelson.com
Friday, October 28, 2011
What are buyers waiting for?
Bargains abound: What are buyers waiting for?
NEW YORK – Oct. 28, 2011 – With low home prices and ultra-low interest rates, the housing market now offers “perhaps the best deals of a generation,” notes a recent article by Bloomberg Businessweek.
Since the housing boom of 2006, home prices have fallen about 31 percent. Also, mortgage rates have been hovering at record lows for the past few weeks – in the 4 percent range or even lower on 30-year fixed-rate mortgages, according to Freddie Mac’s mortgage market survey.
“It’s hard to see the possibility of losing on a home purchase right now, with these mortgage rates,” says economist Dean Baker. “Prices may go lower, but not by much.”
The article notes the following scenario: Buying a $300,000 home with a 4 percent mortgage rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012, but mortgage rates will increase by a half-point. Under that same loan scenario, a home would sell for $289,000 while the monthly mortgage bill would be $1,171 – only a $26 difference.
For those who can qualify for a mortgage, “playing the waiting game” won’t result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek
NEW YORK – Oct. 28, 2011 – With low home prices and ultra-low interest rates, the housing market now offers “perhaps the best deals of a generation,” notes a recent article by Bloomberg Businessweek.
Since the housing boom of 2006, home prices have fallen about 31 percent. Also, mortgage rates have been hovering at record lows for the past few weeks – in the 4 percent range or even lower on 30-year fixed-rate mortgages, according to Freddie Mac’s mortgage market survey.
“It’s hard to see the possibility of losing on a home purchase right now, with these mortgage rates,” says economist Dean Baker. “Prices may go lower, but not by much.”
The article notes the following scenario: Buying a $300,000 home with a 4 percent mortgage rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012, but mortgage rates will increase by a half-point. Under that same loan scenario, a home would sell for $289,000 while the monthly mortgage bill would be $1,171 – only a $26 difference.
For those who can qualify for a mortgage, “playing the waiting game” won’t result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek
Visit my website at: http://www.JayNadelson.com
Wednesday, October 26, 2011
Better to live near vacant home than foreclosure
Living near an occupied property in foreclosure can bring down home prices nearly twice as much than just living next door to a vacant home, according to a new study by the Federal Reserve Bank of Cleveland, which analyzed sales data of nearly 10,000 homes in the Cleveland area.
“The impacts of homes with multiple indicators of distress are larger than the impacts of homes that are only vacant, delinquent, or recently foreclosed,” the researchers found.
Some findings from the study:
• Homes within 500 feet of at least one vacancy sold 0.8 percent lower.
• Occupied homes that had recently entered the foreclosure process lowered the sales price of nearby homes by 1.8 percent.
• Sales within 500 feet of a home where a delinquent borrower abandoned the home saw, on average, a 3.1 percent drop to home values.
• The largest drop was from homes that were tax delinquent, vacant and foreclosed: Home sales prices within 500 feet were found to be 9.6 percent lower.
Visit my website at http://www.JayNadelson.com
“The impacts of homes with multiple indicators of distress are larger than the impacts of homes that are only vacant, delinquent, or recently foreclosed,” the researchers found.
Some findings from the study:
• Homes within 500 feet of at least one vacancy sold 0.8 percent lower.
• Occupied homes that had recently entered the foreclosure process lowered the sales price of nearby homes by 1.8 percent.
• Sales within 500 feet of a home where a delinquent borrower abandoned the home saw, on average, a 3.1 percent drop to home values.
• The largest drop was from homes that were tax delinquent, vacant and foreclosed: Home sales prices within 500 feet were found to be 9.6 percent lower.
Visit my website at http://www.JayNadelson.com
Monday, October 24, 2011
Cash for Keys
With distressed properties accounting for 30 percent of existing-home sales, more real estate professionals are finding a growing part of their job is offering struggling homeowners “cash for keys.”
In the “Cash for Keys” program, homeowners who are facing foreclosure are typically offered $500 to $2,500 if they agree to move out within 30 days (and leave the place clean, too). The program frees homeowners from their obligations while getting a little extra money for moving expenses and avoiding a ruined credit profile from a foreclosure. It also allows the lender to not incur the extra costs of an eviction.
The “Cash for Keys” program is expected to become more mainstream for handling short sales too, not just foreclosures. For example, Bank of America is piloting a program in Florida that pays up to $20,000 to short sellers as well as forgive their loan deficiency.
Banks are looking at offering more incentives to short sales since their losses tend to be far less than a foreclosure. For example, foreclosure properties tend to sell for 40 percent below non-comparable non-distressed properties while short sales tend to sell for 20 percent less.
Please visit my website at http://www.JayNadelson.com
In the “Cash for Keys” program, homeowners who are facing foreclosure are typically offered $500 to $2,500 if they agree to move out within 30 days (and leave the place clean, too). The program frees homeowners from their obligations while getting a little extra money for moving expenses and avoiding a ruined credit profile from a foreclosure. It also allows the lender to not incur the extra costs of an eviction.
The “Cash for Keys” program is expected to become more mainstream for handling short sales too, not just foreclosures. For example, Bank of America is piloting a program in Florida that pays up to $20,000 to short sellers as well as forgive their loan deficiency.
Banks are looking at offering more incentives to short sales since their losses tend to be far less than a foreclosure. For example, foreclosure properties tend to sell for 40 percent below non-comparable non-distressed properties while short sales tend to sell for 20 percent less.
Please visit my website at http://www.JayNadelson.com
Sunday, October 23, 2011
Is now the time to Refinace your mortgage?
Industry experts warn against rushing into a refinancing, especially if you’re a first-timer.
“The first question I ask people is, ‘What are your long-term plans — what are your plans for this house?
If you don’t plan on staying in your home long enough to recoup the closing costs of a refinancing, it may not be worth the effort, he said, adding that it takes about a year, on average, for that to happen these days. (A homeowner can expect to pay an average of 3 to 6 percent of the outstanding principal in refinancing costs.)
HOW SECURE IS YOUR JOB? If you feel you could be out of work in six months or a year, then don’t use up savings to cover fees or increase the down payment. “You don’t want to rob yourself of liquidity because you’re throwings to cover fees or increase the down payment.
WHAT ARE THE SAVINGS? Get a good-faith estimate from your lender and make sure it includes all the costs involved. Then compare these numbers with the amount you would save in the first year of the new mortgage. (Look at the difference between your old monthly payment and your expected new one and multiply by 12.)
WHAT ABOUT THE RATE? Are you getting it locked in — and for how long? How many points are you paying to get a lower rate? Ask to see a rate sheet.
WHAT’S THE RIGHT TIME FRAME? If your children are heading for college in nine years or your retirement is likely in 15, your mortgage term should match up. Most mortgages are made in five-year increments, but some lenders will offer more variety.
Please visit my website at http://www.JayNadelson.com
Excerpts courtesy of the NY Times.
“The first question I ask people is, ‘What are your long-term plans — what are your plans for this house?
If you don’t plan on staying in your home long enough to recoup the closing costs of a refinancing, it may not be worth the effort, he said, adding that it takes about a year, on average, for that to happen these days. (A homeowner can expect to pay an average of 3 to 6 percent of the outstanding principal in refinancing costs.)
HOW SECURE IS YOUR JOB? If you feel you could be out of work in six months or a year, then don’t use up savings to cover fees or increase the down payment. “You don’t want to rob yourself of liquidity because you’re throwings to cover fees or increase the down payment.
WHAT ARE THE SAVINGS? Get a good-faith estimate from your lender and make sure it includes all the costs involved. Then compare these numbers with the amount you would save in the first year of the new mortgage. (Look at the difference between your old monthly payment and your expected new one and multiply by 12.)
WHAT ABOUT THE RATE? Are you getting it locked in — and for how long? How many points are you paying to get a lower rate? Ask to see a rate sheet.
WHAT’S THE RIGHT TIME FRAME? If your children are heading for college in nine years or your retirement is likely in 15, your mortgage term should match up. Most mortgages are made in five-year increments, but some lenders will offer more variety.
Please visit my website at http://www.JayNadelson.com
Excerpts courtesy of the NY Times.
Friday, October 21, 2011
From the WSJ - Now is the time to buy!!
U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.
The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.
Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.
![[UPSIDE]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_sG-MOUas8rJDP2aLlgx6hsYTFyeNkdV_fdtowPVPBzgijNFn_E8UZ2LA8HgWps0dkBEWwU6z42eziDn47X3wskv1JySby2YimBmSVhBL3WHDH2JaYfRpn1zeuuOgFuQ-mShG5f421TotR8dggH8iA8ID0=s0-d)
But the math is turning in buyers' favor. Stock-oriented folks can think of a house's price/rent ratio as akin to a stock's price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.
Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from 1989 to 2003 was about 10, so valuations aren't quite back to normal.
But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren't hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or "points.") The latest rate is still less than half the average since 1971.
As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index's historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today's buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.
For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.
Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. "If you have good credit, a job and a down payment, you can get a mortgage," Mr. Humphries says. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."
Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.
For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent "yield." The median market's rent yield is 9.3% and Detroit's is 17.9%.
Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor's 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.
A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody's Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. "If the economy slips back into recession, however, we could easily see a 10% drop," Ms. Chen says.
And property "flipping" can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.
Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.
The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.
Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.
Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from 1989 to 2003 was about 10, so valuations aren't quite back to normal.
But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren't hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or "points.") The latest rate is still less than half the average since 1971.
Real Estate Tools at SmartMoney
For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.
Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. "If you have good credit, a job and a down payment, you can get a mortgage," Mr. Humphries says. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."
Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.
For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent "yield." The median market's rent yield is 9.3% and Detroit's is 17.9%.
Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor's 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.
A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody's Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. "If the economy slips back into recession, however, we could easily see a 10% drop," Ms. Chen says.
And property "flipping" can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.
Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.
Thursday, October 20, 2011
$1MM Sales increase substantially in SW Florida
Southwest Florida's general real estate market has been showing serious signs of normalcy, and the luxury component is no exception. Facts$1 MILLION PLUS:Sales were up 170% in September, compared with a year ago.Sales in the $1 million-plus market showed a 42.1 percent increase in September from August and were up 170 percent from a year ago in Manatee, Sarasota and Charlotte counties. Pending sales -- contracts that have been signed but not consummated, and often a good indication of future activity -- were up 8 percent last month when compared with August. They were up nearly 77 percent from a year ago. The total number of homes for sale were up less than 1 percent from August, but down by 23 percent from September 2010. Not surprisingly, with its large stable of high-end properties, Sarasota County saw the biggest spike in $1 million-plus sales at 26.7 percent from August and 280 percent from a year ago. September pendings in the county were up 18.8 percent from August and 90 percent from a year ago. The median price for all luxury homes was $1.28 million last month, down from August but up 20 percent from a year ago. Manatee County saw luxury sales rise 133 percent from August and 40 percent from a year ago, while pending sales were down 50 percent in September from August but up by one third from a year ago. The median price for all luxury homes sold during September was $1.82 million last month in Manatee, up about 16 percent from August and about 40 percent from a year ago. |
Wednesday, October 19, 2011
Commercial Deal - LOI
With one client I am working with we put out Letters Of Intent on two commercial properties today. One is a NN (double net) deal for a stand alone Walgreens in Ft. Myers and the other is for a NNN (triple net) deal for a stand alone Firestone store in Allentown, PA. I think my client will be happy if they can close one of these quickly.
I think they are both good deals and I would love to be able to invest along side my client, but then again, I almost never saw a parcel of real estate I did't want to own.
I think they are both good deals and I would love to be able to invest along side my client, but then again, I almost never saw a parcel of real estate I did't want to own.
Venice Housing Market Gaining Strength
Like its southern neighbor North Port, the Venice area's housing market seems to be reaching a level of stability in supplies and pricing, according to a recent analysis.
The number of homes for sale continues to drop and the number of new listings also is decreasing.
As of Sept. 30, 966 homes were for sale, compared with 1,215 a year ago, a decline of 20.5 percent.
There were 162 new listings last month, compared with 176 in August.
A year ago, listings rose to 215 from 186 in August 2010.
The supply of homes, based on the current pace of sales, represented 8.8 months during September, down from 11.6 months a year ago.
The average price was $165,000 last month and $164,000 in August. That compared with $160,000 a year ago and represented an increase of about 3 percent.
As of Sept. 30, 966 homes were for sale, compared with 1,215 a year ago, a decline of 20.5 percent.
There were 162 new listings last month, compared with 176 in August.
A year ago, listings rose to 215 from 186 in August 2010.
The supply of homes, based on the current pace of sales, represented 8.8 months during September, down from 11.6 months a year ago.
The average price was $165,000 last month and $164,000 in August. That compared with $160,000 a year ago and represented an increase of about 3 percent.
Tuesday, October 4, 2011
New Post October 4th
We are looking closely at a Former Eckhart Drug location that is now occupied by Goodwill. The cap rate is attractive and it also has Rite Aid backup on the lease.
1st Posting
This is something of a test post in order to see if I can actually post and view what I write about the Sarasota area Real Estate Market.
Subscribe to:
Posts (Atom)