I hear it often in today's Boise real estate market, when working with buyers, that since it is a buyer's market they can offer less than asking and take their time in placing an offer. In many segments of Boise, Meridian, Eagle and Kuna that is certainly the situation.
But inventory levels in the affordable homes (under $120,000) have restricted to a level that would equate to a seller's market under normal economic times. And while we still have a high amount of dis-stressed properties coming on the market and putting downward pressure on values, those properly priced homes can pull multiple offers in the first day if not within hours of listing. And it is not unusual, today, for homes to sell at or above asking price. That goes against the grain for most of us as buyers, particularly when we recognize the depressed* state of housing values. That is why it is important not to get caught up in listed prices, I provide my buyers a complete analysis of the value of a prospective home independent of asking price.
One must pay closer attention to what the value is and not what the asking price may be. The question as a buyer needs to be not how much I have been able to negotiate the price down from asking but how good of a value I actually got.
For example, if you have 2 identical houses in similar locations, with the first house being listed at $120,000, the 2nd asking $95,000. Would you rather pay $2500 over asking on house number 2, or $15,000 below asking on house number 1? Of course you would want to pay $97,500 instead of $105,000 for the same house.
If you are looking to buy a house call me, I will help you negotiate a true value, not just an illusion!
*In using the phrase depressed state of housing values, I think a more accurate representation of the values is reset rather than depressed. We are not in a temporary depression that we are going to pop out of quickly. But rather our values have been reset, and from this point we will begin the steady appreciation of values that have identified the housing sector for decades.
Friday, April 29, 2011
Thursday, April 28, 2011
Nampa, Boise, Go Green, Save Green!
5 Ways to Go Green and Save Green!
As a GREEN certified Realtor I am well aware of the many different sides of being "green." People have different motivations as well, many out of concern for the environment while others just want to save money. The following 5 ways do a pretty good job of hitting both motivations.
While making your home energy efficient is good for the environment, it’s also good for your wallet.
According to the U.S. Department of Energy, consumers spend $241 billion annually on home energy and 1.2 billion tons of green-house emissions are released as a byproduct. The typical family spends $1,900 on home utility bills, and much of the energy isn’t used. It’s estimated that doing a few simple home improvements would cut the amount of carbon-dioxide released, as well as the amount of money spent on energy bills annually, in half. We dug up some things you can do around the house to help lower both greenhouse gases and your utilities.
Tip #1: Get rid of vampires or other phantom power suckers:This isn’t a reference to the blood-sucking villain or popular culture, but a term that’s used to refer to appliances that suck energy when not in use. Vampire energy, also known as phantom energy or standby power, accounts for 20 percent of home electricity use and 1 percent of carbon dioxide emissions.The biggest culprits are small appliances like coffee-makers, TVs, laptops, cell phone chargers, fans and hair dryers. You can cut back on standby power use by unplugging appliances after you use them or installing a power strip to easily turn several appliances off at once.
Estimated savings: It depends. Cornell University estimates that vampire power adds about $200 to residential energy bills annually.
Tip #2: Change your water heating: The U.S. Department of Energy estimates that water heating can account for 14 to 25 percent of energy use each month. The best way to save energy—and money—is to turn down your hot water heater down to 120 degrees. Most manufacturers set the temperature at 140 degrees which isn’t necessary in washing machines and most dish washers. Want further savings? Most clothing doesn’t need to be washed in hot water; warm to cold water works just as well, and cold water is always fine for rinsing. Consider investing in a front-loader machine which use less water, energy and can cut down on drying times.
Estimated savings: At a very minimum of 3 to 10 percent but a new washer could save you an additional $135 each year on your utility bills.
Tip #3: Change the light bulbs:You’re going to have to eventually change to florescent bulbs (CFLs) when the U.S. begins to phase out incandescent lighting, so might as well start the switch now. According to Energy Star, a program run by the Environmental Protection Agency, switching to CFLs saves “about $600 million in annual energy costs, and prevents 9 billion pounds of greenhouse gas emissions per year, equivalent to those from about 800,000 cars.”Estimated savings: $57.55 over the life of a CFL bulb,according to a study done by Consumer Reports.
Tip #4: Heating and cooling: On average 43 percent of your utility bill goes toward heating or cooling. Heating and cooling systems also generate 12 percent of the nation’s sulfur dioxide and 4 percent of the nitrogen oxides—the two chief ingredients in acid rain. Whether its 10 or 110 degrees, there are several things you can do to significantly decrease heating and cooling costs.
- Turn down your thermostat—especially at night. If you turn the thermostat down by 1 degree for eight hours every night, you’ll use about 1 percent less energy.
- Clean or replace filters on furnaces once a month or as needed.
- During the heating season, keep the draperies and shades on your south-facing windows open during the day to allow the sunlight to enter your home and closed at night to reduce the chill.
- During the cooling season, close blinds and windows during the day to reduce solar gain through windows.
- Invest in energy-efficient products when you buy new heating and cooling equipment.
Estimated savings: 20 to 50 percent
Tip #5: Save water: According to the EPA, leaks account for 10,000 gallons of water wasted in the home each year on average. Fixing leaks can greatly reduce your water bill. Purchase low-flow faucet and shower heads, and if you are looking for a new toilet, invest in a low-flow toilet. Many of these will not perform any differently, but you’ll see significant reductions in your water usage. Lawn and garden watering makes up 40 percent of water use in the summer. Cut down on water costs by investing in a rain barrel to collect water from your roof. In times of drought this water can be used to wash your car or dog and water your garden or lawn. This not only reduces demand on municipal water—saving up to about 1,300 gallons of water during the peak summer months—but also reduces storm runoff.
Estimated savings: 25 to 60 percent off your annual water bill.
Information courtesy of Harris Real Estate University
Wednesday, April 27, 2011
Nampa's Messenger Pizza
After reading a couple of newspaper articles and reviews about the new Messenger pizza in downtown Nampa I was anxious to visit. Walking through the door took me back a few decades to college town pizza joints.
The decor is a mismatch collection of tables, kitchen chairs, living room style chairs, stools and lamps. The menu board also a collection of removable letters and sheets of paper.
Messenger serves a thin crust, incredibly large 24" pizza by the slice offering the customary as well as unusual toppings and combinations. You can also choose you own toppings and order whole pizzas. We went with likely one of the more unusual combos, titled the Drunken Goat. It was topped with figs, goat cheese, bacon, balsamic glaze and topped with fresh arugula.
The crust was tender and tasty. The overall effect of the pizza was out of balance as several of the slices only had the flavor of the sweet fig and a small smattering of the goat cheese. For example, in the slices I ate the taste of bacon never occurred. My daughter who had joined us and took the remaining pieces home reported those slices had several pieces of bacon. It sounds like a bit more care could be taken in the kitchen. If we could have experienced all the flavors I believe it would have been quite the taste treat.
Several of the pizzas they had displayed in "by-the-slice" area looked appetizing, I plan on returning for a quick-lunch.
*See Food Disclaimer
The decor is a mismatch collection of tables, kitchen chairs, living room style chairs, stools and lamps. The menu board also a collection of removable letters and sheets of paper.Messenger serves a thin crust, incredibly large 24" pizza by the slice offering the customary as well as unusual toppings and combinations. You can also choose you own toppings and order whole pizzas. We went with likely one of the more unusual combos, titled the Drunken Goat. It was topped with figs, goat cheese, bacon, balsamic glaze and topped with fresh arugula.
The crust was tender and tasty. The overall effect of the pizza was out of balance as several of the slices only had the flavor of the sweet fig and a small smattering of the goat cheese. For example, in the slices I ate the taste of bacon never occurred. My daughter who had joined us and took the remaining pieces home reported those slices had several pieces of bacon. It sounds like a bit more care could be taken in the kitchen. If we could have experienced all the flavors I believe it would have been quite the taste treat.
Several of the pizzas they had displayed in "by-the-slice" area looked appetizing, I plan on returning for a quick-lunch.
*See Food Disclaimer
Is the Boise real estate market on a recovery path?
I like to report here both local statistics and related information, along with national numbers as well. It helps to obtain a more clear outlook by looking at the big picture as well as the smaller. In previous posts I have provided March numbers for our local real estate market along with some other commentary, but I will take all the good news I can get so today I am including a national look.
The National Association of Realtors in providing the March sales report states; "We're clearly on a recovery path."
National Association of Realtors March Home Sales Data.
“Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,”
The numbers:
* Existing-home sales increased 3.7% from a month earlier to a seasonally adjusted annual rate of 5.10 million.
* About 40% of existing homes bought last month were distressed properties–including foreclosures and short sales. That was the highest percentage since April 2009.
* The median sales price for an existing home was $159,600, down 5.9% from the year-ago median price of $169,600.
* Meanwhile, the inventory of previously owned homes listed for sale climbed at the end of March to 3.55 million available for sale. That represented a 8.4-month supply at the current sales pace, compared with a revised 8.5-month supply in February.
* Last year was the worst year for sales of previously occupied homes since 1997, with about 4.9 million homes sold, according to the Realtors group.
Lawrence Yun, the Realtors chief economist, called the results “a decent figure, not a great figure.” All-cash sales are particularly strong, representing about 35% of all transactions, Yun said. That is likely an all-time high.
Yun, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage."
(Locally I am still concerned with our unemployment rates, we need jobs to fuel a strong recovery.)
Yun continues, "For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”
Tight lending has made it difficult for many would-be buyers to enter the market. “Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.
The National Association of Realtors in providing the March sales report states; "We're clearly on a recovery path."
National Association of Realtors March Home Sales Data.“Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,”
The numbers:
* Existing-home sales increased 3.7% from a month earlier to a seasonally adjusted annual rate of 5.10 million.
* About 40% of existing homes bought last month were distressed properties–including foreclosures and short sales. That was the highest percentage since April 2009.
* The median sales price for an existing home was $159,600, down 5.9% from the year-ago median price of $169,600.
* Meanwhile, the inventory of previously owned homes listed for sale climbed at the end of March to 3.55 million available for sale. That represented a 8.4-month supply at the current sales pace, compared with a revised 8.5-month supply in February.
* Last year was the worst year for sales of previously occupied homes since 1997, with about 4.9 million homes sold, according to the Realtors group.
Lawrence Yun, the Realtors chief economist, called the results “a decent figure, not a great figure.” All-cash sales are particularly strong, representing about 35% of all transactions, Yun said. That is likely an all-time high.
Yun, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage."
(Locally I am still concerned with our unemployment rates, we need jobs to fuel a strong recovery.)
Yun continues, "For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”
Tight lending has made it difficult for many would-be buyers to enter the market. “Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.
Tuesday, April 26, 2011
Ada and Canyon County Real Estate Market's PTC Index
Looking at all the statistics that are published on the health and direction of the Boise-Nampa real estate market area can get rather confusing. I became aware of an index being prepared by Pioneer Title Company, titled (very originally) the PTC Index. In reviewing it I believe it could provide another useful resource in the evaluation of the status of our market.
The Methodology
From the PTCindex.com website:
"To create the PTC Index, we gather data for nine key real estate variables and process them through our weighted algorithm to generate a single number reflective of the Treasure Valley real estate market.
The base data for the PTC Index is culled from various private sources as well as the public domain on a monthly basis.
These nine variables include building permits, new home sales, existing home sales refinances, average home sales price, the 10-year Treasury yield, days on market, distressed (short sales and Real Estate Owned) and notices of default. In simplified terms, the negative data from these sources is subtracted from the positive data to create the PTC Index. But before this happens, the data is weighted using a proprietary computation, resulting in a more accurate reflection of the real estate market.
From time to time, the PTC Index algorithm may be rebalanced to provide the best possible snapshot of the Treasure Valley real estate market."
So with that said here are the numbers and corresponding index number for March, these are combined for Treasure Valley, including both Ada and Canyon counties:
March 2011
| Building Permits | 103 |
| New Home Sales | 73 |
| Existing Home Sales | 732 |
| Refinance | 506 |
| Average Sales Price | 129320 |
| Financial-Bond Market(10-yr Treasury) | 3.41 |
| Days on Market | 98 |
| Distressed(Short Sales and REO) | 4046 |
| Notices of Default | 548 |
| PTC Index | 94 |
To give you some perspective, March's index of 94 compares to 79 in February and 74 for January. Perhaps more telling is comparisons to March of past years; 94 in 2011, 62 in 2010 and 152 in 2009. So are we slowly coming out the dark hole to a more vibrant real estate market? I believe so.
Monday, April 25, 2011
10 Major Mortgage Mistakes to Avoid
It is a good time to buy a house in the Boise-Nampa Metro Area. If your are thinking about buying a house, MSN lists the following ten major mistakes people make with regard to mortgages.
1. Not checking your credit
2. Applying for new credit alongside the mortgage
3. Failing to look at the TOTAL mortgage payment
4. Not seasoning your assets
5. Not getting pre-approved
6. Job-hopping
7. Not shopping around
8. Chasing exotic loan programs
9. Forgetting to lock your rate
10. Not reading your loan documents
I would be happy to answer any questions you may have about these or any other real estate issues. I can also provide names of some outstanding lenders. Getting a good loan officer can prevent a multitude of mortgage problems!
Friday, April 22, 2011
Will Boise, Nampa Investment Real Estate Cash Flow?
The Boise, Nampa metro real estate market has positioned itself to make investing in homes for rentals feasable again. For years that was difficult, if not impossible to accomplish. Investors relied on hopefully rapid appreciation for a future sale to offset the "feeding" of the property in the interim period. Many rentals will cash flow now with the rental market being strong and the selling values low.
All of the local area is in a better postion now for rental investors, with Nampa and Caldwell real estate being espically prime. Real estate investors are really starting to take note.
For example, today I was off to show my clients a bank-owned, fixer-upper house in northwest Boise. They will be using funds from a self-directed IRA to purchase and make repairs on the property.
The location is close to downtown and State Street, in an adorable neighborhood. The place needs some work but it has good "bones", it should be a good investment. It will have the ability to provide a better return on investment during the holding time for their retirement money and gaining value when the eventual appreciation resumes.
I valued another property today for a bank. It currently is being used as a duplex with rental income from current tenants of $1150 per month. The market value in today's market would be about $65,000. The place isn't pretty but the ROI is!
If these sound like something you may be interested in give me a call. 208/602-0055
All of the local area is in a better postion now for rental investors, with Nampa and Caldwell real estate being espically prime. Real estate investors are really starting to take note.
For example, today I was off to show my clients a bank-owned, fixer-upper house in northwest Boise. They will be using funds from a self-directed IRA to purchase and make repairs on the property.
The location is close to downtown and State Street, in an adorable neighborhood. The place needs some work but it has good "bones", it should be a good investment. It will have the ability to provide a better return on investment during the holding time for their retirement money and gaining value when the eventual appreciation resumes.
I valued another property today for a bank. It currently is being used as a duplex with rental income from current tenants of $1150 per month. The market value in today's market would be about $65,000. The place isn't pretty but the ROI is!
If these sound like something you may be interested in give me a call. 208/602-0055
Thursday, April 21, 2011
Boise Restaurant-The Green Chile
Another restaurant that has been on our radar for a while is "The Green Chile" featuring southwest cuisine and located on State street in northwest Boise.
My wife and I stopped in for lunch, we first noticed what was not on the menu. At Mexican type restaurants, I often prefer those dishes served on rice, and my wife leans toward shrimp preparations. Neither were to be found here. Another missing Mexican staple were refried beans. Only cowboy beans were offered here, cooked un- mashed black beans, which I actually prefer.
As the names attests, the specialty of the house is the green chile sauce and at the server's suggestion my wife ordered the green chile bowl. It was lacking in much flavor other than quite spicy hot.
I ordered a regular combo platter, my two selections being the chicken filled chimichanga and chile relleno. The chile relleno is not made in the traditional deep-fried in an egg batter style, nor is it rolled in an egg crepe like so many of local establishments serve. Instead the chile and cheese are rolled in a flour tortilla and then deep-fried. I knew this was the case from the menu and thought I would still give it a try. The traditional deep-fried in egg batter still reigns supreme.
The chicken chimichanga was filled with unseasoned chunk white breast meat, relying on the sauce to impart the spicy flavor. I appreciated the quality of the meat but overall the dish was somewhat underwhelming.
In addition to the signature green chile sauce, they offer a milder red sauce. This red sauce is similar to the enchilada sauces found around the area, but I found it superior as the flavor was much milder than the normal sauces served, which to me was an improvement. (Okay, I am not a big enchilada sauce fan but I could eat this one and my wife also enjoyed it.)
Most dishes are served with the above mentioned beans, spanish rice, (we noticed a flavor of corn here,) and steamed vegetables. There were also some burgers on the menu.
"The Green Chile" calls themselves sizzlin southwest, not Mexican, and from what I read it sounds like New Mexico style cooking with their own unique twists.
*See Food Disclaimer
My wife and I stopped in for lunch, we first noticed what was not on the menu. At Mexican type restaurants, I often prefer those dishes served on rice, and my wife leans toward shrimp preparations. Neither were to be found here. Another missing Mexican staple were refried beans. Only cowboy beans were offered here, cooked un- mashed black beans, which I actually prefer.As the names attests, the specialty of the house is the green chile sauce and at the server's suggestion my wife ordered the green chile bowl. It was lacking in much flavor other than quite spicy hot.
I ordered a regular combo platter, my two selections being the chicken filled chimichanga and chile relleno. The chile relleno is not made in the traditional deep-fried in an egg batter style, nor is it rolled in an egg crepe like so many of local establishments serve. Instead the chile and cheese are rolled in a flour tortilla and then deep-fried. I knew this was the case from the menu and thought I would still give it a try. The traditional deep-fried in egg batter still reigns supreme.
The chicken chimichanga was filled with unseasoned chunk white breast meat, relying on the sauce to impart the spicy flavor. I appreciated the quality of the meat but overall the dish was somewhat underwhelming.
In addition to the signature green chile sauce, they offer a milder red sauce. This red sauce is similar to the enchilada sauces found around the area, but I found it superior as the flavor was much milder than the normal sauces served, which to me was an improvement. (Okay, I am not a big enchilada sauce fan but I could eat this one and my wife also enjoyed it.)
Most dishes are served with the above mentioned beans, spanish rice, (we noticed a flavor of corn here,) and steamed vegetables. There were also some burgers on the menu.
"The Green Chile" calls themselves sizzlin southwest, not Mexican, and from what I read it sounds like New Mexico style cooking with their own unique twists.
*See Food Disclaimer
Wednesday, April 20, 2011
Foreclosed? The tax man may want his cut?
A lot of Boise, Nampa, Eagle, Kuna, Caldwell homeowners are no longer homeowners having lost their homes to foreclosure. When ever that occurs tax questions often come up, the following article by CNNMoney does a good job of covering many of those scenarios.
NEW YORK (CNNMoney) -- Did you lose your house to foreclosure this year? Did your lender forgive some of your mortgage debt because the house sold for less than it the mortgage balance?
If so, you could be facing a big tax hit.
It is IRS policy to tax forgiven debt you are personally responsible for as if it is income. Say, for example, your credit card company settled a $10,000 debt for 50 cents on the dollar. You'd have a debt forgiveness of $5,000, which the IRS would count just like your wages.
The same policy held true for most mortgage debt until 2007, when Congress passed the Mortgage Forgiveness Debt Relief Act. That ended the liability for many homeowners -- but not all.
In general, if you lose your home to foreclosure or short sale, where you sell your home for less than you owe, the IRS won't add insult to injury by counting the difference as income, at least until 2012, when the act expires.
There are four major exceptions to the rule:
1. You did a cash-out refinance and splurged.
Many homeowners took cash out when they refinanced their homes and used the extra dough to pay for new cars, boats, vacations or other spending.
Say you did that and then got into trouble, losing the house through a foreclosure or short sale. Even if your lender waived the remaining debt, the IRS will treat as income the portion of the forgiven debt that you took out as cash and spent.
The IRS' reasoning is that only the money spent on home improvement actually added to your home's value. And that, presumably, diminished the difference between what you owed on your mortgage and the value of your home when it was foreclosed.
Beware: Some lenders made refinancing offers contingent on homeowners paying off credit card debt, according to Kent Anderson, a Eugene, Ore.-based attorney and tax expert. If you took one of those deals, the refinance money will be reported to the IRS and you will owe taxes on it.
2. You have a home-equity line of credit.
The same rules that apply to refinancings also apply to home-equity loans: The IRS will only forgive the tax liability if the loan money was spent on home improvements. And, tax experts advise, be prepared to show receipts to prove it.
3. You lost your vacation home or investment property.
So the market tanked and you lost your vacation home. Unfortunately, if you didn't use it as your primary residence for at least two of the previous five years, you're going to pay the tax man.
More common, however, may be the case of investment properties gone sour. During the housing boom, buying homes for investment purposes soared, accounting for 28% of all sales during 2005, according to the National Association of Realtors. (Vacation homes made up 12%.) And many of these purchases were made with little down payment.
When the bust hit, second home prices cratered. The median price for investment properties fell nearly in half to $94,000 by 2010, according to NAR. For vacation homes, the median price paid dropped 26% to $150,000.
If an investor bought a property in 2005 at the median price and sold it in 2010, she could have run up almost $90,000 in forgiven debt. If she's in the 25% tax bracket, that would add more than $22,000 to her tax liability. Ouch!
4. You owned a multi-million-dollar home.
It may be hard for Americans struggling in this weak economy to sympathize with anyone wealthy enough, at one time, to afford a multi-million-dollar home, but owners losing one could be on the hook for a huge tax bill.
So, say, for example, you're ex-ballpayer and self-styled stock-picker Lenny Dykstra and paid $18.5 million to Wayne Gretzky for a mansion in Thousand Oaks, Calif. When you defaulted on the loan in 2009 and the house was auctioned in 2010 for $10.5 million, you could be on the hook for $6.5 million of the $8.5 million in forgiven debt.
The good news? Even if you fall under any of these four scenarios, you may have a way out, according to Anderson. "If the taxpayer was insolvent at the time of the foreclosure, the forgiven debt can be excluded for tax purposes," he said. "It can also be discharged in a bankruptcy and approved by court order."
People like Dykstra could elude taxes because California is a "non-recourse" state. Lenders there accept homes as the collateral for the debt and when a bank forecloses, the loan is regarded as paid in full. Since there's no debt to forgive there's no taxable income.
It's not always that simple, though. Many homeowners in California and other non-recourse states have refinanced their mortgages and refis are, as a rule, recourse loans, according to attorney Bill Purdy in Santa Cruz,. "A refi destroys your non-recourse status," he said. If a big debt is forgiven, borrowers may owe taxes.
Purdy also explained that banks often file 1099 forms with the IRS that mistakenly list debt forgiveness when there was none.
"People need to regard the 1099s with suspicion," he said. "I've had clients in here who have been making payments to the IRS when they had non-recourse loans."
As long as the Mortgage Forgiveness Debt Relief Act stays in effect, only borrowers for the most expensive properties in foreclosure will have to worry. After that, though, it may pay for any homeowner in foreclosure to be very aware of their tax exposure -- and plan accordingly.
NEW YORK (CNNMoney) -- Did you lose your house to foreclosure this year? Did your lender forgive some of your mortgage debt because the house sold for less than it the mortgage balance?
If so, you could be facing a big tax hit.
It is IRS policy to tax forgiven debt you are personally responsible for as if it is income. Say, for example, your credit card company settled a $10,000 debt for 50 cents on the dollar. You'd have a debt forgiveness of $5,000, which the IRS would count just like your wages.
The same policy held true for most mortgage debt until 2007, when Congress passed the Mortgage Forgiveness Debt Relief Act. That ended the liability for many homeowners -- but not all.
In general, if you lose your home to foreclosure or short sale, where you sell your home for less than you owe, the IRS won't add insult to injury by counting the difference as income, at least until 2012, when the act expires.
There are four major exceptions to the rule:
1. You did a cash-out refinance and splurged.
Many homeowners took cash out when they refinanced their homes and used the extra dough to pay for new cars, boats, vacations or other spending.
Say you did that and then got into trouble, losing the house through a foreclosure or short sale. Even if your lender waived the remaining debt, the IRS will treat as income the portion of the forgiven debt that you took out as cash and spent.
Only the funds used to actually improve your home won't be taxed (plus the costs of refinancing the loan). Yes, even if you spent the money on paying off your student loans or credit cards.
The IRS' reasoning is that only the money spent on home improvement actually added to your home's value. And that, presumably, diminished the difference between what you owed on your mortgage and the value of your home when it was foreclosed.
Beware: Some lenders made refinancing offers contingent on homeowners paying off credit card debt, according to Kent Anderson, a Eugene, Ore.-based attorney and tax expert. If you took one of those deals, the refinance money will be reported to the IRS and you will owe taxes on it.
2. You have a home-equity line of credit.
The same rules that apply to refinancings also apply to home-equity loans: The IRS will only forgive the tax liability if the loan money was spent on home improvements. And, tax experts advise, be prepared to show receipts to prove it.
3. You lost your vacation home or investment property.
So the market tanked and you lost your vacation home. Unfortunately, if you didn't use it as your primary residence for at least two of the previous five years, you're going to pay the tax man.
More common, however, may be the case of investment properties gone sour. During the housing boom, buying homes for investment purposes soared, accounting for 28% of all sales during 2005, according to the National Association of Realtors. (Vacation homes made up 12%.) And many of these purchases were made with little down payment.
When the bust hit, second home prices cratered. The median price for investment properties fell nearly in half to $94,000 by 2010, according to NAR. For vacation homes, the median price paid dropped 26% to $150,000.
If an investor bought a property in 2005 at the median price and sold it in 2010, she could have run up almost $90,000 in forgiven debt. If she's in the 25% tax bracket, that would add more than $22,000 to her tax liability. Ouch!
4. You owned a multi-million-dollar home.
It may be hard for Americans struggling in this weak economy to sympathize with anyone wealthy enough, at one time, to afford a multi-million-dollar home, but owners losing one could be on the hook for a huge tax bill.
Only the first $2 million in forgiven debt will be voided under the relief act; all the overage is taxable as income.
So, say, for example, you're ex-ballpayer and self-styled stock-picker Lenny Dykstra and paid $18.5 million to Wayne Gretzky for a mansion in Thousand Oaks, Calif. When you defaulted on the loan in 2009 and the house was auctioned in 2010 for $10.5 million, you could be on the hook for $6.5 million of the $8.5 million in forgiven debt.
Other ways out
The good news? Even if you fall under any of these four scenarios, you may have a way out, according to Anderson. "If the taxpayer was insolvent at the time of the foreclosure, the forgiven debt can be excluded for tax purposes," he said. "It can also be discharged in a bankruptcy and approved by court order."
People like Dykstra could elude taxes because California is a "non-recourse" state. Lenders there accept homes as the collateral for the debt and when a bank forecloses, the loan is regarded as paid in full. Since there's no debt to forgive there's no taxable income.
It's not always that simple, though. Many homeowners in California and other non-recourse states have refinanced their mortgages and refis are, as a rule, recourse loans, according to attorney Bill Purdy in Santa Cruz,. "A refi destroys your non-recourse status," he said. If a big debt is forgiven, borrowers may owe taxes.
Purdy also explained that banks often file 1099 forms with the IRS that mistakenly list debt forgiveness when there was none.
"People need to regard the 1099s with suspicion," he said. "I've had clients in here who have been making payments to the IRS when they had non-recourse loans."
As long as the Mortgage Forgiveness Debt Relief Act stays in effect, only borrowers for the most expensive properties in foreclosure will have to worry. After that, though, it may pay for any homeowner in foreclosure to be very aware of their tax exposure -- and plan accordingly.
Tuesday, April 19, 2011
Nampa, Bloom Where You Are Planted.
Driving through Nampa a couple of days ago I spotted these flowers in the middle of a small pasture. The quote, "Bloom where you planted," popped in my head.
In searching I can not locate a definitive source for the quote. But I believe it is a worthy sentiment none the less.
Congress, Idaho and the Mortgage Interest Deduction
Since yesterday was tax filing day, I thought it a good time to discuss the current attack on the Mortgage Interest Deduction (MID) going on in Congress. As most home owners realize that by itemizing on your taxes and deducting mortgage interest paid, you can usually save some money on income tax.
For example, a family who bought a home last year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.
A recent survey, American Attitudes About Homeownership, revealed that 74 percent of home owners and 62 percent of renters thought it was “extremely” or “very” important that the MID remain in place.
In Congress, some lawmakers like to call the mortgage interest deduction (MID) a tax break for higher-income households but the vast majority of households that take the deduction are middle-income families, earning either less than $100,000 a year or between $100,000 and $200,000 a year (the typical cut-off point between wealthy and non-wealthy households).
Younger households are also among the biggest beneficiaries, because such a small part of their monthly payment goes to principle. Other big users are larger households—those that need bigger houses to accommodate everyone in their family.
Luckily not all congressmen are on board: "The mortgage interest deduction is helping to keep Americans in their homes at a time when many of them are struggling financially, so it would be foolhardy to tamper with the popular tax benefit now," Rep. Ruben Hinojosa (D-Texas) said at a forum in Washington Sunday.
"If the deduction is eliminated or changed, blame will be placed at the feet of those lawmakers who supported such a “misguided” policy by voters," said Hinojosa, a senior member of the House Financial Services Committee and one of the original sponsors of a House resolution
The resolution was introduced in early January and has just under 40 cosponsors, “and I expect many more to sign on” after lawmakers return next week from a recess, Hinojosa said.
“I cannot support a change to MID to a tax credit, for first or second homes, at this time,” Hinojosa said. “I don’t want to test the waters with Americans already nervous about the economy. Home owners expect to use MID, and buyers expect to receive it.”
If this is something you care about you may want to keep an eye on it and contact our senators and representatives.
For example, a family who bought a home last year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.
A recent survey, American Attitudes About Homeownership, revealed that 74 percent of home owners and 62 percent of renters thought it was “extremely” or “very” important that the MID remain in place.
In Congress, some lawmakers like to call the mortgage interest deduction (MID) a tax break for higher-income households but the vast majority of households that take the deduction are middle-income families, earning either less than $100,000 a year or between $100,000 and $200,000 a year (the typical cut-off point between wealthy and non-wealthy households).
Younger households are also among the biggest beneficiaries, because such a small part of their monthly payment goes to principle. Other big users are larger households—those that need bigger houses to accommodate everyone in their family.
Luckily not all congressmen are on board: "The mortgage interest deduction is helping to keep Americans in their homes at a time when many of them are struggling financially, so it would be foolhardy to tamper with the popular tax benefit now," Rep. Ruben Hinojosa (D-Texas) said at a forum in Washington Sunday.
"If the deduction is eliminated or changed, blame will be placed at the feet of those lawmakers who supported such a “misguided” policy by voters," said Hinojosa, a senior member of the House Financial Services Committee and one of the original sponsors of a House resolution
The resolution was introduced in early January and has just under 40 cosponsors, “and I expect many more to sign on” after lawmakers return next week from a recess, Hinojosa said.
“I cannot support a change to MID to a tax credit, for first or second homes, at this time,” Hinojosa said. “I don’t want to test the waters with Americans already nervous about the economy. Home owners expect to use MID, and buyers expect to receive it.”
If this is something you care about you may want to keep an eye on it and contact our senators and representatives.
Monday, April 18, 2011
Boise, I Think We're Going to Believe Grandpa!
I hear a lot of discussion about the advisability of home ownership after the recent major decline in the value of Boise and Nampa homes. There is certainly more than one side to most discussions. The following discussion from KCM Blog makes some interesting and valid points.
"There are those currently debating the financial advantages of owning a home. Some are looking at studies and reporting that homeownership has never really been a great investment.
One of these people is Jack C. Francis, a formerFederal Reserve economist and professor at Baruch College. He said in a recent CNBC article:
“For generations, parents and grandparents have been telling us that the way to get ahead was to buy a house and keep making payments with a fixed interest rate and after 20 or 30 years it would be way up in value and that was your nest egg in old age. You could either live in it rent free or sell it and use the proceeds to rent an apartment.”
The article goes on to explain the rest of Mr. Francis’ comment:
That was good advice until 2006 when home prices collapsed, he says, and it “may become good advice 10 years from now, but right now it’s not.”
Mr. Francis bases his conclusions on a study he completed which covered the years 1978 through 2008. In his study it showed that home prices increased annually by 5.7% and that the S&P 500 increased by 10.8%. Based on this information, Mr. Francis gives the following advice:
To students who come to him for guidance on whether to buy or rent in the near term, however, Francis has one word of advice: wait. “I keep telling them this is not the time to buy,” he says.
Let’s take a closer look at this conclusion.
1. We have our own study.
Mr. Francis did a study over a thirty year period which did not include the last 3 years. If we look at the same categories since January 2000 (covering one of the worst decades in American real estate history), we find that home values GAINED 42% while the S&P LOST 4.7%. It all depends on which set of data you choose to use.
2. The proper comparison is rent vs. buy.
All of these comparisons claim that putting your money into a different investment vehicle other than real estate might make sense. What they are not taking into consideration is that the investor will still have a housing expense. They will still need money for shelter. They cannot just take their money for shelter and buy other assets with it. A person can’t live in their 401k or their IRA. This leads us to…
3. In most markets today, owning is LESS expensive than renting.
Trulia recently came out with their Rent vs. Buy Index. The report shows:
that it is more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities.
For more on this issue including a 50 city breakdown, click here.
4. Current mortgage opportunities may never be available again
The government has driven mortgage interest rates to all time lows. You can still get a 5% rate and guarantee it for 30 years. Both of these opportunities may soon disappear. Mortgage rates will increase as the economy improves and the Fed no longer feels pressure to keep rates low. The 30 year mortgage may soon be a thing of the past if suggested mortgage reforms come to be. You can lock in your housing expense for 30 years if you purchase. Renting is like having an adjustable rate loan with no cap that readjusts EVERY year. Which way do you think a landlord will readjust it?
5. Most Americans see more to homeownership than financial value.
Last week, Fannie Mae released the National Housing Survey. The survey reported:
- 96% of all homeowners said homeownership has been a positive experience.
- 84% of Americans still believe that owning a home makes more sense than renting.Even 68% of renters believe owning makes more sense.
- 2 in 3 Americans believe that lifestyle benefits of homeownership (65%) are superior to the financial benefits (32%).
Bottom Line
There are more and more studies being done on the value of homeownership. We think we will trust in what our parents and grandparents said. Your mortgage payment is money you put into your savings. Your rent payment goes into the garbage."
Friday, April 15, 2011
Ada and Canyon County, Sales Up-Prices Down!
The March sales numbers are in, which show an increase in number of homes sold over last month in both Ada and Canyon counties. While both counties are above last month's sales, Ada County is below March 2010 with Canyon County slightly above.
Ada county had 516 units sold last month, 318 in Februrary and 567 in March 2010. Canyon's numbers are 275 last month, 232 the previous month with 270 a year ago. Reported pending sales are following the same patterns in both counties, with the March numbers above February but below March of 2010.
The March median price for Ada County was reported as $136,500, down from $149,748 in February and $157,900 a year ago March. The story is much the same in Canyon County with the median price slipping to $80,000 in March from $82,250 the month before and $97,650 in March of 2010.
Likely some of the best news out of this report is that the amount of inventory is shrinking, in Ada County it now stands at 5.9 months, which historically defines a "seller's market". With inventory this low, and not likely to increase quickly, prices should stabilize.
Statistics courtesy of the IMLS
Ada county had 516 units sold last month, 318 in Februrary and 567 in March 2010. Canyon's numbers are 275 last month, 232 the previous month with 270 a year ago. Reported pending sales are following the same patterns in both counties, with the March numbers above February but below March of 2010.
The March median price for Ada County was reported as $136,500, down from $149,748 in February and $157,900 a year ago March. The story is much the same in Canyon County with the median price slipping to $80,000 in March from $82,250 the month before and $97,650 in March of 2010.
Likely some of the best news out of this report is that the amount of inventory is shrinking, in Ada County it now stands at 5.9 months, which historically defines a "seller's market". With inventory this low, and not likely to increase quickly, prices should stabilize.
Statistics courtesy of the IMLS
Thursday, April 14, 2011
Boise-Nampa Metro Area Foreclosure Rate
Nationally the foreclosure rates dropped 15% in first quarter of the year compared to the fourth quarter of last year. That is the biggest drop reported since Realty Trac, an online foreclosure marketplace, began issuing reports in 2005.
Before we start shouting hooray, we need to consider a couple of things. That drop is artificial and is occurring in many judicial-foreclosure states, which are states where in order to foreclose, banks must actually got through a court proceeding. Due to the robo-signing paperwork issue that we have heard so much about, banks have halted many proceedings while trying to clean up their process. It is not a decline in distressed properties, just a delay in moving forward with foreclosure proceedings.
Idaho is a non-judicial foreclosure state, our process is set forth in statute and is not required to go through a court hearing of any type. Thusly, we are not experiencing much of that slow down.
The Boise-Nampa metro area ranks as thirteen highest in the nation in rate of foreclosure. The first quarter of 2011 saw 3,458 fillings which equates to 1 of every 70 households. While that is a decrease of 10.58% over 4th quarter of 2010, it is a 3.01% increase over 1st quarter of 2010.
Personally, I feel that even though the temporary slow down in some parts of the country makes our rates appear worse, those foreclosures are not going away in those areas. Keeping the system moving and getting through this mess and then be able to move on is better. It is ugly anyway you slice it, but a temporary hold does nothing to eliminate the problem.
Before we start shouting hooray, we need to consider a couple of things. That drop is artificial and is occurring in many judicial-foreclosure states, which are states where in order to foreclose, banks must actually got through a court proceeding. Due to the robo-signing paperwork issue that we have heard so much about, banks have halted many proceedings while trying to clean up their process. It is not a decline in distressed properties, just a delay in moving forward with foreclosure proceedings.
Idaho is a non-judicial foreclosure state, our process is set forth in statute and is not required to go through a court hearing of any type. Thusly, we are not experiencing much of that slow down.
The Boise-Nampa metro area ranks as thirteen highest in the nation in rate of foreclosure. The first quarter of 2011 saw 3,458 fillings which equates to 1 of every 70 households. While that is a decrease of 10.58% over 4th quarter of 2010, it is a 3.01% increase over 1st quarter of 2010.
Personally, I feel that even though the temporary slow down in some parts of the country makes our rates appear worse, those foreclosures are not going away in those areas. Keeping the system moving and getting through this mess and then be able to move on is better. It is ugly anyway you slice it, but a temporary hold does nothing to eliminate the problem.
Wednesday, April 13, 2011
Boise, do you Renovate?
I receive questions on what renovations are good for resale value. The important thing to remember that for renovations a 70% or better return is good. If you spend $10,000 and it increases your selling price by $7,000, you have done well. So you really shouldn't do renovations strictly as an investment, you do them for your own comfort and livability. Renovations are different than repairs or rehab work. If prospective buyers see an area in need of repair the amount deducted for that is often closer to double the cost of the actual repair. So it is more cost effective, in most cases, for you as a prospective seller to do the repairs. Also, the return on many low cost items such as new paint, trimming bushes, removing excess furnishings and the like, far exceed the cost.
But with regard to renovations, here are five home improvements that provide a noteworthy return on investment, courtesy of ARAcontent.
"1. Skylights
You can lower your electric bill by installing skylights that will reduce dependency on artificial light and fill your home with natural light...They're also an effective privacy preserver for bathrooms where you might not want a wall window. Skylight and sun tunnels (skylights that use reflective tubes to bring sunlight into rooms without direct roof access) not only enhance the energy efficiency of your home, they just may make you feel better about living there.
2. Decks
Whether you go for wood or composite, adding a deck is a great way to boost resale value, expand your living space and up your enjoyment of your home environment. On average, homeowners who add a wood deck can expect to recoup more than 80 percent of its cost when it comes time to sell, according to Remodeling Magazine's 2009-2010 Cost vs. Value Report. Composite deck additions return about 71 percent at the time of resale.
3. Kitchens
It makes sense that the room where most families spend the bulk of their time would be a popular remodel - and one that pays off big in terms of value and comfort. Even a minor kitchen remodel - costing about $21,000 - will return about 78 percent of its value on resale, according to Remodeling Magazine. A major kitchen job, costing around $57,200, will recoup about $41,200, or 72 percent.
4. Baths
Whether you're tackling a major job that involves knocking out walls and changing fixtures, or just making cosmetic improvements like upgrading faucets and repainting, remodeling a bathroom goes straight to the heart of our craving for comfort. Americans view their baths as far more than a place to get clean and take care of other necessities. Even if you're not creating a home spa, improving the bathroom is sure to boost your home's resale value and increase your satisfaction with the room. Remodeling Magazine says the average bathroom remodel costs around $16,100 and returns up to 71 percent of that cost at the time of sale.
5. Basement/attic remodel
With more families staying put in the homes they have, rather than moving up to larger homes, many Americans are looking for ways to expand their living space while staying in place. Attic and basement remodels are great ways to add usable, livable space at a fraction of the cost of building an addition. The lingering effects of the Great Recession have multiple generations living together under one roof again, and many of these families create bedrooms, bathrooms or even family rooms in unfinished attic or basement space. Everyone appreciates the extra room, and attic renovations and basement remodeling yield resale returns of 83 percent and 75 percent, respectively, according to the Cost vs.Value Report."
I will add a couple caveats here, ALWAYS be aware of your surrounding neighborhoods and what is expected for your size of home. If you overbuild or over improve for your neighborhood your return will greatly diminish. Some renovations will help your home sell faster while not increasing your return.
But with regard to renovations, here are five home improvements that provide a noteworthy return on investment, courtesy of ARAcontent.
"1. Skylights
You can lower your electric bill by installing skylights that will reduce dependency on artificial light and fill your home with natural light...They're also an effective privacy preserver for bathrooms where you might not want a wall window. Skylight and sun tunnels (skylights that use reflective tubes to bring sunlight into rooms without direct roof access) not only enhance the energy efficiency of your home, they just may make you feel better about living there.
2. Decks
Whether you go for wood or composite, adding a deck is a great way to boost resale value, expand your living space and up your enjoyment of your home environment. On average, homeowners who add a wood deck can expect to recoup more than 80 percent of its cost when it comes time to sell, according to Remodeling Magazine's 2009-2010 Cost vs. Value Report. Composite deck additions return about 71 percent at the time of resale.
3. Kitchens
It makes sense that the room where most families spend the bulk of their time would be a popular remodel - and one that pays off big in terms of value and comfort. Even a minor kitchen remodel - costing about $21,000 - will return about 78 percent of its value on resale, according to Remodeling Magazine. A major kitchen job, costing around $57,200, will recoup about $41,200, or 72 percent.
4. Baths
Whether you're tackling a major job that involves knocking out walls and changing fixtures, or just making cosmetic improvements like upgrading faucets and repainting, remodeling a bathroom goes straight to the heart of our craving for comfort. Americans view their baths as far more than a place to get clean and take care of other necessities. Even if you're not creating a home spa, improving the bathroom is sure to boost your home's resale value and increase your satisfaction with the room. Remodeling Magazine says the average bathroom remodel costs around $16,100 and returns up to 71 percent of that cost at the time of sale.
5. Basement/attic remodel
With more families staying put in the homes they have, rather than moving up to larger homes, many Americans are looking for ways to expand their living space while staying in place. Attic and basement remodels are great ways to add usable, livable space at a fraction of the cost of building an addition. The lingering effects of the Great Recession have multiple generations living together under one roof again, and many of these families create bedrooms, bathrooms or even family rooms in unfinished attic or basement space. Everyone appreciates the extra room, and attic renovations and basement remodeling yield resale returns of 83 percent and 75 percent, respectively, according to the Cost vs.Value Report."
I will add a couple caveats here, ALWAYS be aware of your surrounding neighborhoods and what is expected for your size of home. If you overbuild or over improve for your neighborhood your return will greatly diminish. Some renovations will help your home sell faster while not increasing your return.
Tuesday, April 12, 2011
Three Sure Signs of Idaho Spring
As I was out driving around the Treasure Vally today, in addition to the beautiful weather, I noticed what to me are three sure signs of spring.
First, as I was driving to do a price evaluation on a property in rural Canyon County, north of Nampa, I noticed 2 men out with their weed burner burning ditches.
Having been raised on a farm southwest of Kuna, I remember many times out burning weeds. Although it could easily be a hot, dirty job, as a youngster I never really minded it. I enjoyed controlling the flames as they would shout out, destroying everything in its path. Not only the dry weeds that would quickly explode in flames but also the green and growing ones. I found it interesting to watch them as they would turn from green to brown then disintegrate under the non stop propane fueled fire. It also was curious to me that no matter how hot the ambient temperature was the tank of propane was cool to the touch or to set upon. I also remember a time when my cousin was helping, he was much older than I and he was in charge. Which fact I held onto as we got too close to the haystack and it too ended in flames.
The next sign came as I drove over the Boise River into Eagle, it is always fascinating to see the river so high, as it generally almost always is in the spring as the Bureau of Reclamation releases water from Lucky Peak Reservoir to provide room for spring runoff and prevent flooding.
Finally, returning home I could deny it no longer, my lawn most assuredly needs mowing. For that sign me response is; "Dang it! Not already."
First, as I was driving to do a price evaluation on a property in rural Canyon County, north of Nampa, I noticed 2 men out with their weed burner burning ditches.
Having been raised on a farm southwest of Kuna, I remember many times out burning weeds. Although it could easily be a hot, dirty job, as a youngster I never really minded it. I enjoyed controlling the flames as they would shout out, destroying everything in its path. Not only the dry weeds that would quickly explode in flames but also the green and growing ones. I found it interesting to watch them as they would turn from green to brown then disintegrate under the non stop propane fueled fire. It also was curious to me that no matter how hot the ambient temperature was the tank of propane was cool to the touch or to set upon. I also remember a time when my cousin was helping, he was much older than I and he was in charge. Which fact I held onto as we got too close to the haystack and it too ended in flames.
The next sign came as I drove over the Boise River into Eagle, it is always fascinating to see the river so high, as it generally almost always is in the spring as the Bureau of Reclamation releases water from Lucky Peak Reservoir to provide room for spring runoff and prevent flooding.
Finally, returning home I could deny it no longer, my lawn most assuredly needs mowing. For that sign me response is; "Dang it! Not already."
OK Boise. You Win. Stop Listening to Real Estate Agents!
Each day we attempt to give truthful insight on the current housing market. If we report what is perceived as negative news, some in the real estate community come down on us hard. However, when we explain that we think now is a great time to buy, we get an avalanche of feedback from the general public attacking us for being nothing more than puppets for real estate agents across the country. Today, we don’t want you to listen to what we think about the opportunities that exist for buyers in this market. Instead, we want to report on what some members of the investment community are saying.The Wall Street Journal
Jim Woods wrote an article earlier this year for Market Watch, part of the Wall Street Journal’s digital network. Its title: Why your best investment is a house. Mr. Woods compared the investment potential of real estate against other asset classes such as stocks and precious metals. Here was his conclusion.
One reason your best investment right now could be a home has to do with the relative upside of getting in on an asset class while it’s at the bottom versus buying into other asset classes that could be near a top. Consider for a moment the tremendous upside we’ve seen in stocks, precious metals and agricultural commodities over the past 12 months…
If you’re a long-term investor looking to put money to work, now is not really the best time to get into any of these three asset classes. However, with home sales starting to improve, and with prices now possibly forming a bottom, real estate could well be the asset class that represents the best low-risk buying opportunity out there today…
Mr. Woods went on to talk about the financing portion of the purchase:
Yes, mortgage rates still are near historical lows, but if we see these rates rise, then the cost of a new home could climb significantly. So, now could really be the best time to pull the trigger on that home purchase — and it could also be your best investment right now.
Fortune Magazine
Shawn Tully, senior editor at large for Fortune penned an article last week which was titled: Real estate: It’s time to buy again. In the article, Mr. Tully explained:
Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
Let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction … The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Bottom Line
Neither of the two media sources mentioned above has ever been accused of cuddling up to the National Association of Realtors. However, both have come to the same conclusion. It’s time to buy real estate. Perhaps we should listen to them.
Courtesy of the KCM Blog
Monday, April 11, 2011
Loss of Nampa Jobs and Odors!
Bad economic news for Nampa was announced Friday morning. XL Four Star Beef in Nampa will close on June 7 taking with it 522 jobs.
The meat-packing plant located on the east side of Nampa has been at their location of Amity road and the railroad tracks for years under different ownership and names.
I still remember a field trip there when I was in elementary school. After that trip I never looked at hot dogs the same way!
The plant's resulting odors have never been a plus for the surrounding neighborhoods that have encroached around the site. Although the smell is much less today than years ago when there was also a large feed lot adjoining the plant.
The loss of that many jobs will add another obstacle to the full recovery of of our local housing market. It is mighty hard to buy a house or even pay rent without a job. While I don't grieve the loss of the odors, it is hard to see that many folks out of work.
The meat-packing plant located on the east side of Nampa has been at their location of Amity road and the railroad tracks for years under different ownership and names.
I still remember a field trip there when I was in elementary school. After that trip I never looked at hot dogs the same way!The plant's resulting odors have never been a plus for the surrounding neighborhoods that have encroached around the site. Although the smell is much less today than years ago when there was also a large feed lot adjoining the plant.
The loss of that many jobs will add another obstacle to the full recovery of of our local housing market. It is mighty hard to buy a house or even pay rent without a job. While I don't grieve the loss of the odors, it is hard to see that many folks out of work.
Friday, April 8, 2011
Help for Underwater Idaho Homeowners?
For Idaho consumers, finding a way to resist increasing pressure to give up their homes may have found some support in the last week. It sounds like this agreement is about to be agreed upon by the parties involved.
As reported by the LA Times , "last week in Washington, representatives of the five major banks met with state and federal officials working on a settlement between the lending industry and state attorneys general from around the US.
The proposed settlement addresses damages from last year’s moratorium on foreclosure processing caused by “botched foreclosure” paperwork including robo-signing.
The proposal on the table would force banks to allow “severely delinquent homeowners” to sell their homes at short sale prices. Additionally, some mortgage servicers would be forced to reduce “the amount some homeowners owe on their loans”.
“The goal of short sales would be twofold: provide a quicker and more economical way for banks to dispose of distressed real estate and to help stabilize the real estate market by clearing out a backlog of defaulted mortgages that are poised for foreclosure”.
“They would be used in situations in which borrowers were so underwater that the more costly and time-consuming process of foreclosure would seem to be the only option”.
“The banks have given officials a counterproposal on some of the mortgage servicing requirements that includes a single point of contact for distressed homeowners, timelines for considering modifications, an online system for checking the status of applications and a third-party review of rejections, one of the officials said”.
Each state’s Attorney General will have to sign off on any agreed to settlement.
Iowa Attorney General Tom Miller is leading the negotiations. “Seven Republican attorneys general wrote that “the proposals go beyond resolving damages from foreclosure paperwork problems”.
I certainly hope that the short sale process is streamlined it would decrease the loss amount the lenders take on each property. Sellers will be more likely to stay in and maintain their homes until the time of the sale. More buyers would be willing to look at short sales if they were less hassle and lender were quicker with a response.
I will keep you updated once they have reached an agreement and we know effect on Idaho home owners.
As reported by the LA Times , "last week in Washington, representatives of the five major banks met with state and federal officials working on a settlement between the lending industry and state attorneys general from around the US.
The proposed settlement addresses damages from last year’s moratorium on foreclosure processing caused by “botched foreclosure” paperwork including robo-signing.
The proposal on the table would force banks to allow “severely delinquent homeowners” to sell their homes at short sale prices. Additionally, some mortgage servicers would be forced to reduce “the amount some homeowners owe on their loans”.
“The goal of short sales would be twofold: provide a quicker and more economical way for banks to dispose of distressed real estate and to help stabilize the real estate market by clearing out a backlog of defaulted mortgages that are poised for foreclosure”.
“They would be used in situations in which borrowers were so underwater that the more costly and time-consuming process of foreclosure would seem to be the only option”.
“The banks have given officials a counterproposal on some of the mortgage servicing requirements that includes a single point of contact for distressed homeowners, timelines for considering modifications, an online system for checking the status of applications and a third-party review of rejections, one of the officials said”.
Each state’s Attorney General will have to sign off on any agreed to settlement.
Iowa Attorney General Tom Miller is leading the negotiations. “Seven Republican attorneys general wrote that “the proposals go beyond resolving damages from foreclosure paperwork problems”.
I certainly hope that the short sale process is streamlined it would decrease the loss amount the lenders take on each property. Sellers will be more likely to stay in and maintain their homes until the time of the sale. More buyers would be willing to look at short sales if they were less hassle and lender were quicker with a response.
I will keep you updated once they have reached an agreement and we know effect on Idaho home owners.
No Power, No Problem
This week, I was doing an inspection of a 4plex for an out-of-state investor that is looking to purchase some rental units in the Meridian or Caldwell areas. With the Idaho prices down and the Boise valley rental demand heating up, his spread sheet calculations found it is a good time to buy. So I was making note of the condition, taking photos and trying to provide a complete picture of the property for him. In looking at the units I found it curious in looking at the utility area, that the wall between the two main level units had a hole punched clear through.
In visiting with the property manager I found out the reason. The previous tenant had his power shut off due to lack of payment, the adjoining unit was empty but the power was on. So yup, you guessed it, he broke through the wall to steal power from the other unit. And as a parting bonus he stole all the appliances from both units!Rentals can be great investments, and now is a real good time to consider them, but being a landlord is not for the faint of heart.
Thursday, April 7, 2011
Avoid Attractive Female Agents!
In my years of searching for homes with buyers throughout the Boise and Nampa real estate areas, I have seen first hand what I just read in SmartMoney.com.
"If you have hunted for a house, you probably got a sense that real-estate purchases don't represent consumers at their most rational. Did you like a house or apartment more or less depending on whether you saw it on a sunny day? Chances are, you did.
Buying a house isn't the same as buying a stock, an air conditioner or even a car. It's not just a product with pluses and minuses — good school system versus a small kitchen, a new roof versus a longer commute. A house represents the kind of life you want to live. And given its cost, a house and the value it gains or loses represent concretely the life you could live.
Thus, it can be disturbing — though perhaps not surprising — to realize that people's judgment about real estate is susceptible to many of the foolish forces that affect so many other consumer decisions. In some ways, it may be affected even more."
I remember some buyers that I showed two houses that were identical in floor plan and on the same street. The yards and landscaping were also very similar. They liked first home far more than the other. Why? They did not realize it but the reason was because the first home had beautiful new furniture while the second was furnished with older mismatched pieces. Of course, the furniture was not included in the sale.
SmartMoney.com continues: "Research by Michael Seiler, a professor at Old Dominion University in Norfolk, Va., has found that men and women — particularly men — are susceptible to the attractiveness of a female real-estate agent. The more attractive the agent, the more the buyer is willing to pay.
Superficial things such as a room painted an ugly color can make people less likely to buy a house, even though fixing that problem is as cheap as a couple of cans of paint."
I certainly have seen the ugly paint scenario, I had not heard about the attractive female agent factor before. Maybe I should use that in my marketing, "Save Money because I am not young or attractive or female!"
"If you have hunted for a house, you probably got a sense that real-estate purchases don't represent consumers at their most rational. Did you like a house or apartment more or less depending on whether you saw it on a sunny day? Chances are, you did.
Buying a house isn't the same as buying a stock, an air conditioner or even a car. It's not just a product with pluses and minuses — good school system versus a small kitchen, a new roof versus a longer commute. A house represents the kind of life you want to live. And given its cost, a house and the value it gains or loses represent concretely the life you could live.
Thus, it can be disturbing — though perhaps not surprising — to realize that people's judgment about real estate is susceptible to many of the foolish forces that affect so many other consumer decisions. In some ways, it may be affected even more."
I remember some buyers that I showed two houses that were identical in floor plan and on the same street. The yards and landscaping were also very similar. They liked first home far more than the other. Why? They did not realize it but the reason was because the first home had beautiful new furniture while the second was furnished with older mismatched pieces. Of course, the furniture was not included in the sale.
SmartMoney.com continues: "Research by Michael Seiler, a professor at Old Dominion University in Norfolk, Va., has found that men and women — particularly men — are susceptible to the attractiveness of a female real-estate agent. The more attractive the agent, the more the buyer is willing to pay.
Superficial things such as a room painted an ugly color can make people less likely to buy a house, even though fixing that problem is as cheap as a couple of cans of paint."
I certainly have seen the ugly paint scenario, I had not heard about the attractive female agent factor before. Maybe I should use that in my marketing, "Save Money because I am not young or attractive or female!"
Willowcreek Grill
I have been wanting to try Willowcreek Grill for a long time. They are located on Vista in Boise, and they also operate the adjoining RAW sushi restaurant. So when I saw a Groupon ad for them I jumped on it.
So we visited last evening, we ended up not trying as many things as perhaps we had planned, due to a fortuitous situation. When you are at Willowcreek Grill you can also order from the RAW menu. Well, we now quite enjoy sushi and have eaten at RAW previously. So we ordered the Tempura Vegetables and Shrimp from RAW along with the Rattlesnake sushi roll. The tempura was crispy and nicely done with a perhaps a rather limited selection of vegetables, consisting of broccoli, carrots, mushrooms and red pepper. The red pepper was sliced whole horizontally which provided a lovely presentation. The dipping sauce served with them seemed a bit lacking as it was simply sweet and could have used an infusion of other flavors. The Rattlesnake roll was tasty, it is mixture of spicy tuna, cream cheese and crispy shrimp topped with avocado, eel and various sauces. It has been our favorite when dining at RAW in the past.
So back to the Willowcreek Grill, we decided to share the Seafood Cioppino, which is a fisherman stew served over a bed of linguini. We are not well acquainted with this dish and that admittedly may have contributed to our lack of enthusiasm for the resulting entree. It is a medley of seafood; bay shrimp, salmon, cod and clams served in a tomato based sauce. The sauce had a undertone we did not care for along with what we felt was a too strong tomato flavor. The salmon was the outstanding ingredient by far in this dish, it was fresh tasting with just the right amount of fish flavor and succulently tender, my wife set to just eating the salmon pieces.
Our server was very attentive and noticing our disaappointing reaction offered a replacement. She recommended the Thai Chicken Pasta, stating it was very good and quite popular. We accepted her offer and appreciated her professionalism.
I am afraid the pasta did not thrill us either. It tasted simply like peanut butter on noodles, with none of the hints of sesame, ginger or vinegar that could have livened it up.
Now for dessert, yes after all that we did order dessert, we did have a coupon to use up you know! We choose the key lime cheesecake, hoping the creaminess of a cheesecake to be the perfect compliment to the tartness of the key lime. It was not to be the case, as the bitterness of the lime completely overshadowed any of the cream cheese flavor on which we had counted. The chocolate crust had a pleasant flavor on its own but did nothing for the key lime.
We likely just chose poorly as the other diners appeared to be enjoying their offerings. We did notice a lot of burgers and sandwich plates with sweet potato fries. If you are looking for a place to keep everyone happy where you can get sushi and standard American fare, the Willowcreek Grill is a good option.
*Please see Disclaimer
So we visited last evening, we ended up not trying as many things as perhaps we had planned, due to a fortuitous situation. When you are at Willowcreek Grill you can also order from the RAW menu. Well, we now quite enjoy sushi and have eaten at RAW previously. So we ordered the Tempura Vegetables and Shrimp from RAW along with the Rattlesnake sushi roll. The tempura was crispy and nicely done with a perhaps a rather limited selection of vegetables, consisting of broccoli, carrots, mushrooms and red pepper. The red pepper was sliced whole horizontally which provided a lovely presentation. The dipping sauce served with them seemed a bit lacking as it was simply sweet and could have used an infusion of other flavors. The Rattlesnake roll was tasty, it is mixture of spicy tuna, cream cheese and crispy shrimp topped with avocado, eel and various sauces. It has been our favorite when dining at RAW in the past.
So back to the Willowcreek Grill, we decided to share the Seafood Cioppino, which is a fisherman stew served over a bed of linguini. We are not well acquainted with this dish and that admittedly may have contributed to our lack of enthusiasm for the resulting entree. It is a medley of seafood; bay shrimp, salmon, cod and clams served in a tomato based sauce. The sauce had a undertone we did not care for along with what we felt was a too strong tomato flavor. The salmon was the outstanding ingredient by far in this dish, it was fresh tasting with just the right amount of fish flavor and succulently tender, my wife set to just eating the salmon pieces.
Our server was very attentive and noticing our disaappointing reaction offered a replacement. She recommended the Thai Chicken Pasta, stating it was very good and quite popular. We accepted her offer and appreciated her professionalism.
I am afraid the pasta did not thrill us either. It tasted simply like peanut butter on noodles, with none of the hints of sesame, ginger or vinegar that could have livened it up.
Now for dessert, yes after all that we did order dessert, we did have a coupon to use up you know! We choose the key lime cheesecake, hoping the creaminess of a cheesecake to be the perfect compliment to the tartness of the key lime. It was not to be the case, as the bitterness of the lime completely overshadowed any of the cream cheese flavor on which we had counted. The chocolate crust had a pleasant flavor on its own but did nothing for the key lime.
We likely just chose poorly as the other diners appeared to be enjoying their offerings. We did notice a lot of burgers and sandwich plates with sweet potato fries. If you are looking for a place to keep everyone happy where you can get sushi and standard American fare, the Willowcreek Grill is a good option.
*Please see Disclaimer
Disclaimer-What do I know about food?
What do I know about food? I like it. I like to try new places, a lot of the enjoyment my wife get when we travel is trying new food outlets. I love the excitement and enjoyment of finding new great food offerings. We do end up suffering through some less than outstanding experiences as well, but that is all part of the hunt. I thought I would share our experiences in the search for great places to eat in the Treasure Valley.
Now the disclaimer part, I do not claim to have particular knowledge or training in food. I freely acknowledge that entrées I do not enjoy at a restaurant may be because of my selection, it may have just not been my thing. Also, my wife and I are very picky with food, perhaps too picky at times. But it is all about one person's opinion, or maybe two.
Also, most of these posts will be after one visit, unlike the minimum of two of the restaurant critics. So it may have just been an off time for restaurant, or maybe just off time for my taste buds.
Now the disclaimer part, I do not claim to have particular knowledge or training in food. I freely acknowledge that entrées I do not enjoy at a restaurant may be because of my selection, it may have just not been my thing. Also, my wife and I are very picky with food, perhaps too picky at times. But it is all about one person's opinion, or maybe two.
Also, most of these posts will be after one visit, unlike the minimum of two of the restaurant critics. So it may have just been an off time for restaurant, or maybe just off time for my taste buds.
Wednesday, April 6, 2011
Help for Unemployed Idaho Home Owners
Hi everyone, I wanted to get this news out. If you unemployed or it sounds like maybe even recently underemployed you need to take at look at this. U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan approved the State of Idaho's bid to administer HUD's Emergency Homeowner Loan Program (EHLP), a bridge loan program designed to help unemployed families pay their mortgages. HUD determined Idaho's Housing and Finance Association's mortgage bridge loan program is "substantially similar" to HUD's program, thereby allowing Idaho to begin implementing the program itself. Finally sounds like a government program that may actually help some people who need it. Having it done on a local level through Idaho Housing should help as well. However, it is a loan, and if you are underwater on your house it is not going to help remedy that situation. Idaho Housing & Finance Association is ready to take applications immediately! The program will offer a declining balance, deferred payment "bridge loan" (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months. Under the program, eligible borrowers must: 1.Be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years; 2.Have a mortgage property that is the principal residence of the borrower; and 3.Demonstrate a good payment record prior to the event that produced the reduction of income. If it sounds like you may qualify give them a call, their office is in Boise, phone number (208)331-4888. |
Tuesday, April 5, 2011
So, what's up?
Good Morning Boise! I read this letter to the editor in the Idaho Statesman and it gave me a chuckle so I thought I would pass it on. Enjoy!
"So, what’s up?
What’s up? Well, gas and diesel prices are certainly up. And education reform pro and con has everybody’s dander up. Idaho’s population is up. My doctor says Medicare’s time is up (for me anyway). Taxes (subtle fees and levies, etc.) are up. Charlie Sheen is way up. Megaloads are on their way up (north). Politicians’ whines make me want to throw up. Being constantly overweight has me fed up. Every morning I’m lucky I wake up. My blood pressure is up. What would some women look like without makeup? Baseball pitchers still throw a change up. Remember to keep your chin up. My wife said shut up and I thought she said stand up (ooh, I’ll hear about that set-up). Did I mention my blood pressure? Popkey should wise up. Life goes on — do not let it get you down!"
GILBERT BOLEN, Boise
Read more: http://www.idahostatesman.com/2011/04/04/1591734/letters-to-the-editor.html#ixzz1IfLgIqaB
"So, what’s up?
What’s up? Well, gas and diesel prices are certainly up. And education reform pro and con has everybody’s dander up. Idaho’s population is up. My doctor says Medicare’s time is up (for me anyway). Taxes (subtle fees and levies, etc.) are up. Charlie Sheen is way up. Megaloads are on their way up (north). Politicians’ whines make me want to throw up. Being constantly overweight has me fed up. Every morning I’m lucky I wake up. My blood pressure is up. What would some women look like without makeup? Baseball pitchers still throw a change up. Remember to keep your chin up. My wife said shut up and I thought she said stand up (ooh, I’ll hear about that set-up). Did I mention my blood pressure? Popkey should wise up. Life goes on — do not let it get you down!"
GILBERT BOLEN, Boise
Read more: http://www.idahostatesman.com/2011/04/04/1591734/letters-to-the-editor.html#ixzz1IfLgIqaB
3 Questions You Must Answer Before Buying A Home
This is a good follow up to the previous post on whether it is a good time to buy Idaho real estate. It is also by the folks at KCM.
There are three questions you should ask before purchasing in today’s market:
We believe that in most parts of the country prices will in fact soften in 2011. Price is the major concern for anyone selling a home. When you are buying, COST should be your primary concern however. Your monthly payment (cost) is definitely impacted by the price of the home you purchase. The other major component is the interest rate. Waiting for prices to bottom out while rates are increasing can wind up costing you more over the life of the mortgage (see chart here).
Over the last seven weeks, rates have increased over 1/2 a point going from 4.17 to 4.86. Looking at the attached chart shows this increase. Waiting for prices to bottom out seems to make perfect sense. Yet, at a time when rates are increasing, it might NOT make sense. Make sure you have a mortgage professional help you with this math before making a decision.
In an article last week CNN Money reported:
This is a great question. Macro Markets, LLC is a company that studies housing prices. They started their Home Price Expectation Survey in 2010. They ask 100+ housing industry experts to project housing prices through 2015. The most current survey shows that the experts are predicting prices to soften until 2012. The experts then project prices to rise reaching a cumulative appreciation of over 10% by 2015.
Purchasing a home today makes great sense from a financial standpoint. Think of the old axiom: You want to buy low and sell high. We may be at the low point regarding the COST of a home. But, this decision should not only be a financial one.
That leads us to our third and final question:
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons people buy a home have nothing to do with money:
What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the reason whether you decide to purchase or not.
The COST of a home will probably remain relatively unchanged even if prices continue to depreciate. Don’t allow money to get in the way of you making the right decision for you and your family. In the long run, the finances will work in your favor anyway."
"If you are thinking about purchasing a home right now, you are surely getting a lot of advice. And most of that advice is probably negative. Why buy now with prices still falling? Don’t you realize real estate is no longer a good investment? Don’t you know that people who bought five years ago lost their shirt? We understand the concern your friends and family have. However, let’s look at whether or not now is actually the perfect time to buy a home.
There are three questions you should ask before purchasing in today’s market:
1. Why should I buy if house prices are still depreciating?
We believe that in most parts of the country prices will in fact soften in 2011. Price is the major concern for anyone selling a home. When you are buying, COST should be your primary concern however. Your monthly payment (cost) is definitely impacted by the price of the home you purchase. The other major component is the interest rate. Waiting for prices to bottom out while rates are increasing can wind up costing you more over the life of the mortgage (see chart here).
Over the last seven weeks, rates have increased over 1/2 a point going from 4.17 to 4.86. Looking at the attached chart shows this increase. Waiting for prices to bottom out seems to make perfect sense. Yet, at a time when rates are increasing, it might NOT make sense. Make sure you have a mortgage professional help you with this math before making a decision.In an article last week CNN Money reported:
“You can kiss those record lows goodbye,” said Greg McBride, chief economist for Bankrate.com.
Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.
“I don’t think we’re going back to a 50-year low anytime soon without an economic collapse,” he said. “Rates will probably never revisit those levels.”
2. When will I begin to see appreciation if I buy now?
This is a great question. Macro Markets, LLC is a company that studies housing prices. They started their Home Price Expectation Survey in 2010. They ask 100+ housing industry experts to project housing prices through 2015. The most current survey shows that the experts are predicting prices to soften until 2012. The experts then project prices to rise reaching a cumulative appreciation of over 10% by 2015.
Purchasing a home today makes great sense from a financial standpoint. Think of the old axiom: You want to buy low and sell high. We may be at the low point regarding the COST of a home. But, this decision should not only be a financial one.
That leads us to our third and final question:
3. Why am I buying a home in the first place?
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons people buy a home have nothing to do with money:
- A good place to raise children and for them to get a good education
- A place where you and your family feel safe
- More space for you and your family
- Control of the space
What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the reason whether you decide to purchase or not.
Bottom Line
The COST of a home will probably remain relatively unchanged even if prices continue to depreciate. Don’t allow money to get in the way of you making the right decision for you and your family. In the long run, the finances will work in your favor anyway."
Monday, April 4, 2011
Hello HUD, is anyone home?
Currently I have some buyers that have made an offer on a HUD repo located in northwest Boise. They are paying cash, using money from a self directed IRA. They would have been ready to close within a week from when we submitted the offer. HUD states for us to insert a 45 day closing timeframe in the offer. The management company for HUD has not yet paid all the bills so that the escrow company can close the transaction.
We are now 30 days into the escrow period and I receive a notice today that my buyers need to file an extension for the closing date and include an extension fee. It is the HUD vendor's fault for the delay and yet they have the gall to request an extension fee from my clients. The request letter does state that if the delay is not the fault of the buyers, the fee will be refunded at closing. So they will get it back, but it does really bug me.
While I am on the subject of HUD, we had another transaction a year or so ago with another cash buyer purchasing a HUD repo in Kuna. Our buyer was ready to close early and was informed that HUD would not close it before the stated closing date. Not that there was anything preventing it from closing early but that was when they had scheduled it.
Most sellers want their money as soon as they can get it. There is a certain amount of time value with money. But this is our government after all and as we often see they don't expend a great deal of rational thought on how to wisely spend our money.
So hello HUD, anyone home?
We are now 30 days into the escrow period and I receive a notice today that my buyers need to file an extension for the closing date and include an extension fee. It is the HUD vendor's fault for the delay and yet they have the gall to request an extension fee from my clients. The request letter does state that if the delay is not the fault of the buyers, the fee will be refunded at closing. So they will get it back, but it does really bug me.
While I am on the subject of HUD, we had another transaction a year or so ago with another cash buyer purchasing a HUD repo in Kuna. Our buyer was ready to close early and was informed that HUD would not close it before the stated closing date. Not that there was anything preventing it from closing early but that was when they had scheduled it.
Most sellers want their money as soon as they can get it. There is a certain amount of time value with money. But this is our government after all and as we often see they don't expend a great deal of rational thought on how to wisely spend our money.
So hello HUD, anyone home?
Friday, April 1, 2011
Three Degree Guarantee!
Good Morning Treasure Valley! What a beautiful spring day, temperature to be in the low 70's, the sun is out, attitudes are improving, and houses are worth more. (Yes, studies have shown that houses bring higher offers on sunny good weather days than bad.) Speaking of the weather, one of the local Boise TV weather forecasters offers a "three degree guarantee." Sounds great. But what do I get if he misses the mark? Do I get my weather back? Can I take the temperature back to him for an adjustment? Will he make it up on the next day's forecast, and how will he do that? Does he lose his job? How do I get a refund?
It seems to me that it is mighty easy to make a guarantee when there is no recourse. I suppose it is a catchy phrase. I guess I worry less about catchy phrases and more with the actions behind the phrases. You will hear a lot of those kind of phrases thrown about by agents. I am much more content under promising and over delivering!
But with or without a guarantee, it is a beautiful day!
It seems to me that it is mighty easy to make a guarantee when there is no recourse. I suppose it is a catchy phrase. I guess I worry less about catchy phrases and more with the actions behind the phrases. You will hear a lot of those kind of phrases thrown about by agents. I am much more content under promising and over delivering!
But with or without a guarantee, it is a beautiful day!
Idaho Homeowners-I Feel Your Pain.
In visiting with potential home sellers it is always a challenge to have them recognize the realistic market value of their homes. With the recent massive declines we have seen in the value of Idaho homes, that job has become even more difficult. It is painful for many homeowners to come to the realization that their home is not worth what it once was, and not just finiacially painful but psychologically as well.
It is always interesting to me how the same person can not accept the value of the home they are selling but are quick to undervalue what they would like to buy. I suppose it is in our natures to feel losses more severely than gains.
Results that support my feelings are found in a study that was done by economists David Genesove and Christopher Mayer as reported in SmartMoney.com.
"When a market goes south, as the housing market did recently, standard economics tell us that sellers should recalibrate their expectations and behavior, knowing they must sell for less.
Of course, this isn't how our brains work. Instead, we're susceptible to loss aversion, the mental quirk by which we feel losses much more sharply than we feel gains. Instead of setting the price of our property by what the market will bear, we set it by what we paid and what we think we "have to" get.
People who bought at or near the peak of the Boston condo boom listed their properties for around 35% more than others. Consequently, those overpriced properties sat on the market; fewer than 30% sold after 180 days. Another wrinkle: Owners who lived in the units showed about twice as much loss aversion as people who had bought them as investment properties. A home, it seems, makes us more irrational than a house.
It doesn't take a boom or bust to trigger this phenomenon: A more recent study says that homeowners consistently overestimate the value of their homes by 5% to 10%. The only cure for this seems to be buying a home during a slump; these buyers may underestimate their home's value.
Buyers getting in now, then, may be at a cognitive advantage for years to come. Boom buyers, meanwhile, must come to terms not only with economic losses but also psychological losses and regret."
Coming to terms with losses is not easy, but only after we do can we move on. So let's move on!
It is always interesting to me how the same person can not accept the value of the home they are selling but are quick to undervalue what they would like to buy. I suppose it is in our natures to feel losses more severely than gains.
Results that support my feelings are found in a study that was done by economists David Genesove and Christopher Mayer as reported in SmartMoney.com.
"When a market goes south, as the housing market did recently, standard economics tell us that sellers should recalibrate their expectations and behavior, knowing they must sell for less.
Of course, this isn't how our brains work. Instead, we're susceptible to loss aversion, the mental quirk by which we feel losses much more sharply than we feel gains. Instead of setting the price of our property by what the market will bear, we set it by what we paid and what we think we "have to" get.
People who bought at or near the peak of the Boston condo boom listed their properties for around 35% more than others. Consequently, those overpriced properties sat on the market; fewer than 30% sold after 180 days. Another wrinkle: Owners who lived in the units showed about twice as much loss aversion as people who had bought them as investment properties. A home, it seems, makes us more irrational than a house.
It doesn't take a boom or bust to trigger this phenomenon: A more recent study says that homeowners consistently overestimate the value of their homes by 5% to 10%. The only cure for this seems to be buying a home during a slump; these buyers may underestimate their home's value.
Buyers getting in now, then, may be at a cognitive advantage for years to come. Boom buyers, meanwhile, must come to terms not only with economic losses but also psychological losses and regret."
Coming to terms with losses is not easy, but only after we do can we move on. So let's move on!
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