Pricing Your Home Off The Market

Hi Folks,
   I hope you've had a great week, thus far.

   If you've seen the Real Estate news from this week, we had some incredible news, with the National Association of Realtors (NAR) stating that "Pending home sales rose in July to the highest level in over two years and remain well above year-ago levels" (Up almost 2.5% from June 2012 to July 2012 and almost 2.5% from July 2011 to July 2012). With this fantastic news, we also heard from the Standard and Poors/Case-Shiller folks that Home prices are on the rise, showing, "positive annual growth rates for the first time since the summer of 2010", and also, this is the second consecutive month where "all 20 cities and both Composites recorded positive monthly gains."

   So if you're selling a home, where do you even begin to price it? Emotions usually dictate the offer price that a seller will choose, as opposed to solid, fact-based reasoning. HomeGain.com ran a survey earlier this year that uncovered the following: "76 percent of homeowners believe their home is worth more than the list price recommended by their real estate agent."

   "Homebuyers usually have a better grasp of current market value in the area where they're looking to buy than do sellers who own and live there", says Dian Hymer, a veteran real estate broker, author, and a nationally syndicated real estate columnist, in a recent story on the Inman News website. Hymer says that "Buyers look at a lot of new listings. They make offers, know what sells quickly and for how much, and what doesn't and why." HomeGain reported that "homebuyers still think sellers are overpricing their homes."

   Hymer says that if a home lacks features from recent sales comparables ("comps"), "it's time to subtract value". She reminds us that a home is worth "what a buyer will pay for it given current market conditions", which may conflict with your opinion on price or what you are hoping for. With a spot-on comment on this dance, Hymer says that "Relying on emotion rather than logic when selecting a list price can lead to disappointing results."

   As for timing, Hymer says that it's the "prime opportunity for selling a home" when it first hits the market, as there are buyers who wait for these new listings, and as she writes, these listings "receive the most showings and have the busiest open houses during the first couple of weeks they are on the market". With that rule in mind, that is the time to show off your home at an attractive list price, and she aptly says, "Listings that sell today are priced right for the market". Very simply, Buyers want to feel they are getting a good deal, and will not overpay in a market that is still dropping or struggling, and Hymer says that in areas of strong sales, "buyers may shy away from multiple-offer situations if they feel the recovery is fragile and that prices may slide further before stabilizing", thus, effectively, it seems they would step away from engaging in a bidding war.

   As most of you are aware, real estate agents and appraisers use "Comps", or sales of similar homes in your area, to help establish a price range for offering/selling your home. Hymer says that if your home does not have a feature of a specific Comp (i.e. a remodeled kitchen), value is subtracted from the value of your home, and if your home has a feature that a specific Comp does not have (i.e. an easily accessible, level backyard), value is added to your potential sales price.

   With that being said, we're all human, and emotions play a factor.

   As Hymer says, "It's difficult for sellers to step back and take an attitude of detached interest in their home", and adds that it's "essential to do so if you want to sell successfully in this market.". She suggests selecting a "list price that undercuts the competition to drive buyers" (and offers?), to your home. She also says that if Comps show prices moving up, you can take a "more aggressive stance on pricing". "But don't list too high", cautions Hymer, who says that it's better to "stay in the range shown by the comparables and expose the house to the market before accepting offers", since the market will drive up the price if it's warranted.

   As a final note, Hymer cautions us not to rely on rumors about home sale prices that circulate in the neighborhood, as they tend to get inflated when "passed from one person to another", and suggests that you, "Select your list price based on hard facts."

   What are your thoughts on this? Have you sold a home before? Have you overpriced it? Did you underprice it? We'd love to hear about your experience, good or bad.

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Happy Birthday to my son, who turned 6 today !

Have a Great Weekend, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
Rent to Own Homes and Real Estate Blog for HomeRun Homes: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com


TAGS: #HomeSales #HomePrices #RealEstate #homebuyer #homeowner #salescomparables #Comps #Appraiser #NationalAssociationofRealtors #NAR

Contract Cancellations A Factor in Home Sales Drop

Hi Folks,

   I'm honored to have you here with me today and always.

   This past week, the National Association of Realtors®, or NAR, released their June figures for Existing-Home Sales, which showed a decrease.

Let's take a quick look at the breakdown and then we'll discuss the factors involved:
  * From June 2010 - June 2011:
       The Northeast dropped 17% and the Midwest dropped 14%
  * Single-family home sales were stable, but the condo sector weakened.

Some other important details, per the NAR:
  * First-time buyers purchased 31 percent of homes in June (At 36% in May, and 43% in June 2010).
  * Investors accounted for 19 percent of purchase activity in June (Unchanged from May, and 13% in June 2010).

   Prices were up slightly, but Lawrence Yun, NAR chief economist, called it an "uneven recovery". NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., went further, and added that home sales should be higher, saying, "With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales”.

   What was a major factor?

   The NAR Press Release said that "Contract cancellations spiked unexpectedly", and according to Victor Benoun, President of The Mortgage Source, Inc., cancellations were up 16%., which is a "telling number".

Benoun explained that there are several factors for the spike in cancellations:
  * First, says Benoun, to some extent, "buyers remorse may set in"
     He says this could be related to costly repairs discovered during an inspection.
  * Another factor is financing.
     Benoun says that lenders have made borrowing more difficult
  * Benoun also points to Appraisals.
     He says "If the value comes in lower than sales price", it is another cause.
  * Finally, he points to employment (losing a job while applying for a home loan)

   However, as with all Economic numbers, they vary by location.

   "The national numbers show how local real estate truly is.", says Ken Anderson, President and Broker of Coldwell Banker Evergreen Olympic Realty. Anderson says that they are, "not seeing the higher cancellation rates reported in other parts of the country", and that buyers "are cancelling far fewer contracts than a year ago, when the stimulus created too much urgency".

   In spite of the market, there is hope. Anderson says, "Our home sales increased 11% from May to June. Buyers are recognizing the opportunities and are getting back into the market.". Benoun says that there is a "silver lining for those who have the desire and ability to purchase a home.", and adds that prices "have not been this low in a decade and mortgage rates are hovering at 30 year lows.

   Where do you think the market is headed? Since the jump in cancellations was unexpected, what other factors might also happen unexpectedly?


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Have a Great Weekend, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #ContractCancellations #HomeSales #ExistingHomeSales #NAR #recovery #housing

Should We Fear The Qualified Residential Mortgage Definition?

Hi Folks,

   Welcome back, and hope your weekend was great !

   There has been a humongous amount of buzz surrounding section 941 of the Dodd-Frank Act ("Wall Street Reform and Consumer Protection Act of 2010"), which requires, per the National Association of Realtors (NAR) website (Realtor.org), that lenders "securitize mortgage loans to retain 5% of the credit risk unless the mortgage is a qualified residential mortgage or is otherwise exempt (for example, FHA mortgages are also exempt)".

   Why is this so scary?

   The QRM definition is of extraordinary importance because it will determine the types of mortgages that will be generally available for borrowers for the foreseeable future. We look back at the NAR website, which says that the rule, "would (a) drive borrowers to FHA if they do not have 20% down or (b) mean those who couldn’t put 20% down would have to pay up to 3 percentage points more for a loan (for example, 8% mortgage vs. 5% mortgage) or not qualify at all. Even a 10% downpayment QRM would have a negative impact on FHA and the markets."

   Let's get a little bit more granular on this, namely, how this affects new buyers and sellers looking to refinance their homes. This is very important.

   Melanie J. McLane, a Real Estate Speaker and Trainer, says that stats from her trade organization, the NAR, indicates, "two striking things: 1) it will take the average buyer 16 years to save a 20% down payment, vs a 5%; and 2) the risk to the lender going from 95% LTV to 80% LTV is only 6/10 of one percent (less risky).". "The majority of home buyers do not have 20% to put down. Sellers are enlightened to offer creative financing due to low equity, a new attitude may emerge: "if I am about to lose my credit and home, of course you can take over my payments, forget saving 20% for down payment" What you may have as an end result is a nation of people taking over existing loans in lieu of obtaining new financing.", says Dean Wegner, a Mortgage Originator in Scottsdale, Arizona.

   Jeffrey R. Kershner, Managing Broker/Principal with an Illinois Real Estate Company, takes an even granular approach, and says that for a person making "the median household income in Illinois of just over $53,000", that it will take them "9.24 years to save up for a required $40,000 down payment on a $200,000 house; that is with saving 10% after taxes per year. This will greatly increase the age by which first time buyers can enter the market and will adversely affect the middle class."

   Substantial problems for new buyers, which would change the entire market.

   For existing homeowners, per an article by Jon Prior on Housingwire.com, "an overwhelming percentage of homeowners located in states hardest hit by the housing downturn would be shut out of refinancing their mortgage because they do not meet equity standards under the proposed risk-retention rule", according to a study from consumer and industry groups. The story says that a white paper submitted to regulators, "showed existing homeowners would be harmed as well", since, "A borrower must hold 25% equity in the home in order to refinance into a QRM loan and at least 30% equity for a QRM cash-out refinance loan, according to the current proposal."

   Where does this have it's biggest impact? In the story from Prior, he cites data from CoreLogic that, "showed the five states most impacted by the proposed equity requirements are Nevada, Arizona, Georgia, Florida and Michigan.", and says that home values dropped so much in these areas that the study "found two out of three homeowners in these states would not have the necessary 25% equity to refinance. The study also found six out of 10 would not be able to move out of the home and put 20% down on a new QRM." In Michigan, the study showed 64% of Michigan homeowners do not meet the 25% equity requirement, 66% in Florida, 65% in Georgia, 72% in Arizona, and the big one...Nevada...where 83% of homeowners, "do not have 25% equity in their home and would not be able – even if they had never missed a payment – to refinance into a lower-rate QRM loan."

   Prior summarizes that, "In effect, the proposed QRM would penalize families who have played by the rules, scraped each month to pay their bills, kept their credit clean, and saved for a modest down payment," according to the study.

   McLane feels that this is all due to that fact that we are, "over correcting from the early 2000’s when anyone with a pulse got a mortgage to an extreme on the other end now, where you can have perfect credit and offer up your first born child, and they still say either “no” or “maybe, we have to verify something else”. The banks are terrified of examiners, unknown parts of Dodd-Frank, etc.". Wegner feels that this is, "just another step backward for housing and adding to more years of recovery. We understand that risk prevention is critical for lenders going forward but knee-jerk reactions like this without fully understanding the implications are only going to hinder housing."

   Suggestions? Wegner says that the real estate market needs, "expansion in the buyer pool to open more doors to prospective home buyers", and he suggests that they should focus on, "expanding programs to self employed borrowers", since, "1 in 3 Americans is defined as "self-employed" for underwriting purposes and therefore can not purchase a home." He rhetorically asks, "What if they allowed them to go "stated" with 50% down, 750 fico's, primary residence and single family only.", and says that this would easily boost housing 10%.

   What are your thoughts? What would you suggest if you were able to chat with Regulators?

Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #QRM #NAR #QualifiedResidentialMortgage #FHA # mortgage

Housing Numbers Down, But Positivity Remains High

Hi Everyone,
   Glad to have you with me here this Friday. How was your week? Did you meet all of your goals? I hope so.

   There were two very important housing numbers released this week, and I'd like to take a look at each of these, along with some commentary on what these numbers mean for the Housing Market and the Economy.

   The first set of numbers released were the New Residential Construction figures for April, which is broken down into Building Permits, Housing Starts, and Housing Completions. Overall, there were minor drops in each of these numbers from the previous month (March), but anywhere from 13% to 35% below the figures from April of 2010.

   Additionally, the National Association of Realtors® (NAR) released their figures for Existing Home Sales, and these did not fare so well, either. Even though the market for Existing Homes made gains in 6 of the last 9 months, the numbers, which represent completed transactions that include single-family, town homes, condominiums and co-ops, dropped almost 1% from March, but almost 13% from April 2010. Some additional notes, per the NAR, show that "Total housing inventory at the end of April increased 9.9 percent", and the very interesting side-note which says that, "First-time buyers purchased 36 percent of homes in April, up from 33 percent in March; they were 49 percent in April 2010 when the tax credit was in place. Investors slipped to 20 percent in April from 22 percent of purchase activity in March; they were 15 percent in April 2010. The balance of sales was to repeat buyers, which were 44 percent in April."

   Although these numbers point to some not-so-good conditions, not everything and everyone is negative on the Housing Market. Jane Frederick, an architect who specializes in custom residences, says that she believes that, "architects are the "canary in the mine" in that we see the slowdowns first and the increase in work first.", and says that they have signed 2 new contracts for new houses in the past three weeks and that their phone, "is ringing more now than it has in the past three years. "I believe that we are finally moving out of this recession", says Frederick.

   "I recently read an article about the severe drop in housing starts and how that will eventually effect supply and prices.", says John Boyd of MeetingWave.com, who adds that, "I'm not suggesting now is the exact time to buy but seems to be getting close with low rates starting to creep up. Not sure when it will happen with the current joblessness, etc., but there are many folks renting houses, adult children living with parents, etc. that eventually we'll hit a solid floor and see an uptick."

   What's your take on the market. Where do you think we are headed? How soon? Why?

Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #residentialconstruction #realtors #existinghomes