Idaho-Awakening From Hibernation

An improving economy is contributing to a gradual rebound in home prices across the country, according to mortgage giant Freddie Mac’s 2012 Economic Outlook report, released Wednesday. But there is still a way to go in the road to recovery for the housing market, the report noted.

“The housing market is showing some signs of shaking off the depression-like conditions that have plagued it for much of the past few years,” according to the report. “As if awakening from hibernation, housing starts and home sales moved to higher levels of activity.”

In fact, the signs have prompted Freddie Mac to revise its forecast upwards for home sales and originations. One economic contributor that’s helping to stabilize housing: The drop in the unemployment rate to 8.3 percent, its lowest level in three years, according to the report.

“A variety of encouraging indicators suggest that the housing market may be feeling a nascent recovery ... and more neighborhoods may see a stabilization in overall demand and housing values this spring,” says Frank Nothaft, Freddie Mac’s chief economist.

Median home sale prices are up, despite a slight drop in new and existing home sales, Freddie Mac reports. About a half of the increase in housing starts has been for construction of rental apartments in multi-unit buildings to meet the increasing demand, the report notes. New rental construction, at its current pace, is expected to reach its highest level since 2005.

“Housing starts continue to run below net household formations [and will allow for absorption of existing vacant homes],” according to the report.

Source: “Freddie Mac: Economic Growth Expected to Stabilize Housing Market,” Dow Jones Newswires (March 28, 2012)

 

Cheaper To Buy Than To Rent

Rental rates have been rising in the Boise-Nampa Metro area and with prices still so low and interest rates still very low, even with the bump last week, it is likely cheaper for most people to buy than to rent. If you have been on the fence now is the time to get off! (Rather than look back and wish you had.)

Last week, Trulia released their Winter 2012 Rent vs. Buy Index. In the index, they report that:

“After years of home price declines and tightening rental markets, home ownership is now more affordable than renting in all but two of the 100 largest metros – even in expensive real estate markets such as New York, Los Angeles and Boston.”

The two metros where renting was more affordable were Honolulu and San Francisco. However, Truliaexplains that, even in these markets, buying a home:

“…might make sense for people who plan to stay in their next home for at least five years and can benefit from the mortgage-interest tax deduction.”

This rent/buy ratio favors buying more so then at almost any time in history. In a recent article, Forbes Magazine quotes Jed Kolko, Trulia’s chief economist:

“Certainly prices have continued to fall nationally, but rents have been rising so this would be the lowest price-to-rent ratio that we’ve seen.”

Bottom Line

It might be time to talk to a local real estate professional about the possibility that buying a home makes sense for you and family.

 

Appreciation is back in Ada County!

It appears we see appreciation of real estate values this year in Ada County! I do not believe it will be huge but it will be present. This appears to be consistent with the national scene, as witnessed by the following front page of Barron's magazine.

First Time Home Buyers: The Stats

Thought this was an interesting graphic illustrating first time home buyer stats. It has been rewarding here in Idaho lately to assist many individuals and families get into their first homes. I helped families in Boise, Meridian, Kuna and Nampa in the last little while. I will be posting some additional things in the next couple of days all stating the same thing. Now is the time to buy!  If you are ready for your first home, give me a call.

The following is from KCM Blog.

Idaho Sellers-Showing Tips

I just returned from showing a home to prospective buyers. And while you may find buyers able and willing to overlook clutter and dirt, it ALWAYS affects their perception of the house. From dirty shower doors, funny odors, dust and dirty vents to dirt on the siding all play a part in the judgements people are making on how well they believe the house is built and maintained. You will still be able to sell your house if you don't pay attention but not for the amount you could have otherwise.

When I returned back to the office I found the following tips from the local PODS franchise.

Potential buyers have a tendency to look in every nook and cranny – in closets, cabinets, and under beds. Staging the home, and making it clutter-free, is now easier than ever with PODS. Follow these 5 steps to achieve home-showing success!

1.  Create more space. The bottom line when selling a home is to create the illusion that living areas are more spacious. Since buyers often envision their own furniture in homes they visit, showing plenty of floor and wall space to make the home feel bigger is a priority. You may love those two overstuffed recliners near the fireplace, but how does placement effect floor space? Place any large, bulky furniture in a PODS® container for safekeeping during this interim process.

2.  Spic and span. Clean the house from top to bottom and clear the clutter from countertops. It may be worthwhile to hire a cleaning company and keep your focus on other parts of the moving process. Are hallways filled with hanging picture frames? Keep a select few to highlight and pack the others carefully in a box for retrieval at a later date. Minimize items on display in other areas of the home as well – in the bedroom, bathroom, kitchen and living areas.

3.  Don’t forget the garage. While women tend to look at a kitchen first, men will head for the garage. Essentially another room, do not neglect cleaning up and de-cluttering the garage. Load all of the sports gear, motorcycles, bikes and seasonal décor in a PODS® container until needed again.

4.  Make an outstanding first impression. Lawns should be freshly cut, gardens weeded out and landscaping neatly manicured. It is always a bonus to have bright flowers or plants near the front door and fresh-cut flowers in vases around in rooms on open-house day.

5.  Let there be light. Light equals space. Open curtains and

blinds and clean windows, screens and skylights. Remove large furniture or wall units that block window views to a PODS® container and make sure all light fixtures have new, brightly burning bulbs.

 

Rents Rising as Rental Availability Shrinks

Whether buying for your own residence, or as an investor, with rents going up now is the time to buy! Call me today!

Because of the challenges in the current economy, many families have either decided to rent or been forced to rent. How has this impacted rental options and the cost of the available options?

HousingWire recently quoted Paul Dales, senior economist with Capital Economics:

“As a consequence of Americans being less willing and less able to buy a home, the number of households in rented accommodation is set to rise by at least 850,000 a year over the next few years.”

The price of anything is determined by supply and demand. As demand increases, the price of an item will increase unless there is an equal increase in supply. The article mentioned above said:

“Dales said in his research that rental vacancy rates will fall again in the future, pushing prices up. The median rent is already up to $712 per month—well above the average monthly mortgage cost of $647, Dales reported.

He estimates vacancies in the home-rental market will push average rental rates up as much as 5% by early 2013.”

How many markets will be impacted? A new rent index offered by Zillow:

“…showed year-over-year gains for 69.2 percent of metropolitan areas covered.”

Bottom Line

Rents are increasing and will continue to do so for the foreseeable future. In many parts of the country, buying a home might make more sense as you can lock in your housing expense for the next thirty years

 

Four Offers and Counting!

I just returned from showing houses in Nampa and Caldwell, and writing an offer. In fact it was the fourth offer written by these buyers. They keep getting outbid in multiple offer situations, all of the homes have been bank repossessions. In checking on properties for them, I heard back from one agent today that she had 7 offers on a house in West Nampa. I also heard back from a different agent regarding 6 offers on a South Nampa house. So if you are doubting that inventory levels are low, to that I say: Believe IT!

March Madness for Real Estate and Mortgages

I hear lots of these rumors about interest rates, government plans etc., some are valid and some not, so I have reprinted this great article from KCM Blog that clarifies a few of them.

It’s the time of year when the so-called experts tell you how to fill out your brackets for college basketball. The frenzy has been coined March Madness. Well, in the mortgage industry, we are seeing a frenzy of headlines, offers of so-called expert advice, and an unusually high level of buzz around real estate and mortgages. Here are some of the things I keep hearing…

• “The bank bailout settlement is going to allow all the shadow inventory to come to market at lower prices, which is going to drive home prices even lower.” Likely true. How much and how fast prices fall will be determined by the speed at which lenders proceed with the foreclosures.


• “The bank bailout settlement means people will get large principal reductions in their loans, if they are underwater.” Some will, most won’t. In its settlement, Bank of America will exclude loans owned by FannieMae/FreddieMac. This agreement will probably be mirrored by others, and therefore, won’t help a good portion of the population.


• “The government has finally helped the homeowner who is underwater yet still maintained a good payment history.” Semi-true. If you have an FHA loan closed prior to June 2009, you are able to do a streamline IF rates make sense in June (too soon to tell). If you closed after June 2009, no such luck. On the conventional front, HARP 2.0 may offer some help to those who have had their loan held by FannieMae/FreddieMac as long as there was no private mortgage insurance. Not exactly all inclusive – but applaudable.


• “You need to put 20% down to get a mortgage these days.” I hear this crazy notion from people far too often. Besides the FHA insuring loans with as little as 3.5% down (on loans up to $729,250 in high cost areas), people often forget that veterans can still finance 100% of the purchase price, and that Private Mortgage Insurance Companies are still insuring loans with 5-10% down.


• “Costs associated with loans are going up.” Most definitely. The hike in the guarantee fees has already caused a 3/8 – 1/2 increase in conventional loans and will raise FHA loans by 10 basis points in April. The FHA is also changing its premium structure to increase the cost of the mortgage—regardless of where rates themselves are headed.


• “Rates will stay low through 2014.” While every indication from Ben Bernacke & friends is consistent in their rhetoric that rates will stay low, we have already seen some significant swings in rates based on market conditions (unemployment numbers, problems in Greece, and so on). Rates will likely stay low, but getting the best rate will still require staying on top of everything.

Amongst the whirlwind of sound bites and headlines, there is some good news about real estate and mortgages. Never as rosy as it may sound, there is relief and opportunity for many  if you can sort through the hyperbole and consult with a true professional to make sure you have all the facts.

 

Ada County February Market Report

Ada county's real estate market is on the rebound,  our February sales are up 13.5% over a year ago, our median price has increased for two months in a row, inventory levels continue to decline with our percent of distressed properties remaining about the same.

As a courtesy from the Ada County Association of Realtors here those stats in pictures.

Let me Say Again Idaho-It is time to buy!

Ada County prices have hit bottom and will quite possibly show some appreciation this year. Canyon County prices are also showing signs of stabilizing. As I have written of before, combine that with the low interest rates and now is the time to buy. I am including an article from KCM Blog about the cost of buying, excellent points to consider.

We have often advised buyers to look at the COST of purchasing a house more than the PRICE of the home. Obviously, price is part of the cost equation. The other piece, assuming you are not an all cash buyer, is the mortgage rate. The mortgage rate to finance a purchase can have a dramatic impact on the overall cost. Recently, there are more people talking about the possibility that mortgage rates could begin to increase.

HSH.com studies trends in mortgage rates. They explain:

“A better economic climate almost always brings higher rates, and a lessening of the troubles in Europe from massive central bank assistance adds to the movement of money from safe havens to more risky assets, driving rates upward.”

Dan Green of The Daily Market Reports recently stated:

“The Fed sees growth coming faster than originally expected. There’s suddenly less chance that the Federal Reserve will intervene to help keep mortgage rates low. Absent Fed intervention, mortgage rates are apt to rise and Wall Street is now betting that the Fed has bowed out. With no stimulus, mortgage rates rise.”

Lawrence Yun, chief economist for the National Assoc of Realtors, recently wrote:

“Mortgage rates will be starting to rise. From the 3.9 to 4.0 percent average rate in the past five months on a 30-year fixed mortgage, the new rates will soon be in the range of 4.3 to 4.6 percent.”

Yun explains his logic here.

We do not attempt to predict future interest rates. We leave that up to the experts in the field. However, we want our readers to understand the potential impact on the cost of purchasing a home if they do rise. Here is a simple table that shows, even if the PRICE of a home softens, the COST of a home could increase.

Bottom Line

Many purchasers think they should wait until they are sure that prices have hit bottom. Deciding whether or not to wait should be determined by where the COST of a home is headed.

 

Short Sale Success: What is an Acceptable Hardship?

A short sale, in most instances, is a complex transaction. However, there are two very simplistic characteristics that every qualified short sale possesses:

1. The house must be valued at less than the homeowner owes on their mortgage debt obligation. In other words, the home must be “underwater”.


2. The homeowner must have a qualified hardship.

It is the second characteristic that we would like to touch upon in this blog post.

One question that we answer frequently is “My house is underwater. Is this an acceptable hardship?”  Unfortunately, the answer is always “No.”

The simple fact that a homeowners mortgage obligation is in access of their house value is not an acceptable hardship. A Short Selling bank will entertain a short sale when and only when there is a hardship that will, now or in the future, affect the borrower’s ability to pay their mortgage.

The following is a list of acceptable hardships that may be used when submitting a short sale package:

• Mortgage Rate Adjustments


• Loss of Employment or Reduction in Wages


• Business Failure


• Medical Hardship


• Death in the Family


• Divorce/Separation


• Military Service


• Overwhelming Debt Obligations


• Job Relocation

As always, should you have questions as to the acceptability of a hardship scenario, you should seek advice from an expert that has been trained in the short sale field.

 

February Market Report…it just gets better and better.

Sales in February 2012 were 439 in Ada County, an increase of 13.4% over February 2011. This is the strongest February sales we’ve had since 2007.  Year-to-date sales are 829; 13% over the first two months of 2011. Historically, February sales outpace January by an average of 14%. February 2012 sales increased by 14% over January 2012. Nationally we know that one job is create for every two homes sold.  So far in 2012 we have helped to create 400 jobs.  We also know that for each homes sold there is a $60,000 cash infusion to the community; based on YTD sales we have added $50Million to our valley’s economy so far this year. Of our total sales in February… 44% were distressed….down 9% from January 2012. In February 2011, 59% of our sales were distressed. The 9% decrease in February returns us to the average that we’d been seeing over the last 8 months.   In July we were down to 42% overall. Pending sales at the end of February were 975; an increase of 14% from the end of January. In general pending sales increase in February compared to January; and should continue to increase all the way through April or May. The percentage of pending sales in distress decreased 6% from January, totaling 41% overall. We are now at ten consecutive months below 50%. At the end of February, we had 14% more sales pending than at the end of January 2011. February median home price was 158,000; up 5.6% from February 2011; and up 14% from January 2012. New Homes median price for January was $209,000; a decrease of 1% from January 2011. The number of houses available continues to decrease. At the end of February our total active inventory was 1,932 homes. This is down 1% from December and 27% less than last year at this time. At the same time, the percentage of distressed active inventory dipped 1% to 34%. We have been hovering between 33% and 36% since May. We remain well below the 40% levels set last spring….when we were on the increase. In Ada County we have 4.4 months of inventory on hand. The price category in shortest supply is <$119,000 with 2.5 months. In the range of $120,000 to $159,999 we have 3.7 months. All price points up to $200,000 have less than 5 months supply. We have benefited all year from inventory levels much lower than national average. Now, however, we are starting to see some slowdown in sales as the inventory continues to fall. Multiple offers are much more prevalent than any time since 2005. REALTOR® Magazine online offer great insight into managing multiple offers with theirNegotiating Toolkit. Based on February sold data, our most desirable price point is <$120,000 at 28% of all sales.  The next largest price point sold is $120,000 to $160,000 which accounted for 23% of total sales.  The biggest increase was in sales between $200,000 and $250,000; which were up 100% from January 2012 to 14% overall. There is no longer any doubt that, in Ada County, we are in full recovery mode. The challenge to our continued recovery is available product. There continues to be broad speculation on the impact of REO properties coming onto our market in a way that would upset our continued recovery.   The level of consumer demand, and the nearly bare cupboards of home inventory suggest that we will be able to withstand the impact.

 

Idaho Sellers-Enhance Your Home's Appeal

Pricing your home realistically will most certainly get potential buyers through the door, but how do you get them to fall in love with the home? A recent article at U.S. News & World Report offers some of the following tips for sellers in enhancing their home’s appeal.

1. Add curb appeal: "Make sure the house is cleared of winter clutter, that windows are washed, that the front door is painted or clean,” says Brad Knapp, regional vice president for the National Association of REALTORS® for Ohio and Michigan. “You have to give the house good curb appeal.”


2. Declutter: Remove clutter from the home so that buyers can actually see what all the home has to offer. Any excess belongings of the sellers should be stored in the garage or in a storage unit.


3. Be careful not to offend: "Hunters and fisherman often have game hanging on the walls," Knapp notes. "Some people are offended, so get that off the walls and into the garage."


4. Consider staging: "It might behoove [sellers] to hire a professional stager to help them," says Robert Simon, a professor at Cleveland State University. "You have to get it right so it looks lived in, but definitely not cluttered."


5. Complete routine maintenance: Make sure your sellers complete any routine maintenance projects before the home is listed. Also, sellers need to realize that "people don't care if you spent $15,000 fixing the roof. It's worth nothing," Simon says. "The market expects the roof to be in tip-top shape. You have to go above and beyond."

 

Snails in Idaho?

I wonder what the auditor from the Idaho Real Estate Commission would had to say about this situation.

Courtesy of Inman News

Idaho's Shadow Inventory-It's a good thing!

I have been saying for months that I did not believe that Idaho's shadow inventory would be major. (Shadow inventory are homes that banks have foreclosed on but have not yet put on the market for sale.) Many areas have a huge amount that will negatively impact home values for months and maybe even years to come. But this graphic shows Idaho at one of the lowest rates in the nation. As Martha Stewart would say, "It's a good thing."  At least I think that is what she would say!

House Sales in the U.S.

Here is an interesting graphic from KCM Blog:

 

 

Idaho Sellers:The Price of Your Home VS The Price of Happiness

I see a lot my Boise and Nampa sellers and past sellers in this timely article by Steve Harney of the KCM Blog.

I recently gave a presentation about the current real estate market to a group of home sellers in a city in the Northeast.  That night, I explained to them that home values in their area were about to be negatively impacted by a surge of distressed properties entering their region over the next year. As I have often found to be the case, the homeowners were very receptive; many felt that they now had the information they needed to make a good decision with regard to pricing their home to sell in this market.

After the class that night, several of the homeowners came up to me to privately discuss their personal situations. One of these owners said something I will never forget. He shared with me that he had come to a revelation that night.

This particular homeowner had put his home on the market with plans to move to Florida, where his daughter and his infant grandson live. He missed his daughter very much and missed his grandson even more. He hated every passing day that he wasn’t able to “hold the baby in my arms and rock him to sleep”. That night at the seminar, he thanked me for reminding him of the reason he put his home on the market in the first place – he needed to rejoin his family. I was struck by the wisdom of his final words to me before he turned to walk away.

“I thought I was putting a price on my home. While I hold out– hoping to get a few more dollars, I am actually putting a value on my happiness.”

He adjusted his asking price that night and sold it three days later. Very soon, he will be able to rock his grandson to sleep in his arms, both of them happy and content.

 

 

Former Idaho Home Owners Wait for a Second Chance

More than 4 million homes have been lost to foreclosure in the last six years, and many of those former home owners are now starting to ask: When can we buy again?

Many banks have guidelines that prevent them from issuing loans to people with a foreclosure or short sale in their credit history in some cases for as much as seven years. That also doesn’t factor in the damage foreclosures and short sales can do to a person’s credit score, and the work former home owners' will need to do to repair it so they’ll have a better chance at qualifying for financing again in the future.

Still, some former home owners, particularly those who foreclosed or did a short sale due to extenuating circumstances like a job loss or illness, are finding the wait may not be as long as they were once told.

"They're probably going to pay a little higher interest rate, but with rates so low, a higher interest rate of 4 percent is not a big deal," Rosa Herwick, a broker and owner of Century 21 JR Realty in Henderson, Nev., told the Associated Press.

The wait-time varies among lenders and government entities. For example, the Federal Housing Administration says former home owners with a foreclosure must wait three years before they can qualify, while Fannie Mae and Freddie Mac require a seven-year wait following a foreclosure.

As for short sales, sometimes these waits can be waived or drastically cut, depending on the borrower’s situation. FHA requires a three-year wait following a short sale, but it may waive that wait if the short sale was due to a job loss.

Also, for borrowers who can come up with a higher down payment on their next home purchase, they may also not have as long to wait. For example, Fannie Mae will reduce the wait from seven years to two years for borrowers who come with a down payment of 20 percent or more.

If you did a short sale and did not miss any payments you may also find some lenders willing to lend to you immediately. (However, many lenders will not talk to you about a short sale until you are behind on your payments, sort of counter intuitive to me.)

Attention Idaho home buyers: HUD Increases Costs Effective April

I referenced this earlier, the cost of a FHA loan will be going up, if you looking to possibly buy Idaho real estate, right now is the time! Call or email me today!

In a move to increase their financial standing (and to get the FHA back into required capital requirements), on Monday, HUD announced their anticipated increases in the premiums they charge borrowers. Simply stated, the cost of borrowing is going up.

FHA loans, by design, are more liberal in their underwriting guidelines than most conventional loan products (in terms of credit, income ratios, required investment from the borrower, and maximum loan amount). HUD is not a lender. Rather, it is a federally-insured insurance company. They insure lenders against default on loans underwritten in compliance with their published guidelines. It is because of this insurance that lenders approve and close loans with more liberal guidelines.

As an insurance company, HUD charges two types of premiums on the FHA mortgages:

• The UFMIP (Up Front Mortgage Insurance Premium) will be raised effective April 1, 2012 from its current 1% to 1.75%. One advantage to the UFMIP is the fact that it is typically built into the loan amount and does not require additional cash outlay at closing. However, the increase in loan amount does impact monthly payment and cash flow.


• The MMIP (Monthly Mortgage Insurance Premium) will be raised 10 basis points on April 1, 2012 to cover the requirements of the payroll tax extension approved last year. This is a direct increase of 10 basis points in the borrower’s mortgage payment, and has the effect of a 10 basis point increase in interest rates. As a kicker, loans over $625,000 will be bumped 35 basis points from today’s levels effective June 1, 2012. This bump is substantial, as you can see in the chart below.

On a loan amount of $300,000, we are seeing an increased payment of $36.41, which doesn’t sound too bad. However, we know that home buyers buy homes comparing what their monthly payment will be after they close. This hike in payment is equivalent to borrowing an additional $7000. Starting next month, it’s as if the home became $7000 more expensive. What is the result? Buyers are going to have to pay more OR they’re going to have to offer less to the seller (to maintain the same mortgage payment they were comfortable with today). A $7000 lower offer is like another 2.5% decline of home prices. Not good for anyone.

Advice:

Sellers, price correctly and get into contract in March. (I have a great article on this coming in a day or two.)

Buyers, today is the cheapest mortgage you are likely to see in your lifetime (all things considered)! Get off the fence and buy NOW!

______________

P.S. – Rumors are strong that FHA is looking to reduce the allowable sellers’ concession from 6% to 3% in April as well. This move will have a huge impact on how much cash will be needed to buy (especially in places like NY with the NYS Mortgage Tax).  Hurry—get in the game!

Idaho Home Buyers Ride Perfect Storm!

When all conditions combine to make a perfect time to buy Idaho property, I call it the Idaho Home Buyer's Perfect Storm.

The first condition is the low, low prices of homes in the Boise-Nampa Metro Area. I am also seeing that the downward spiral in Idaho housing prices that we have been experiencing then past several years is starting to stabilize.

The second condition is historically low interest rates for Idaho homebuyers. These are rates we thought would never be seen again, they increase your buying power tremendously by lowering bowering costs and monthly payments.

Thirdly, FHA is scheduled to increase mortgage insurance premiums in April, you need to get that new home found now and your loan locked.

Don't be one of those who look back to March of 2012 and wish you had bought then! Contact me today, today's buying storm may do as the old refrain, March comes in like a lion and goes out like a lamb.