Thursday, August 23, 2012

Ada- Canyon County Real Estate Market Reaches New High!

I have reprinted this index number for several months, I find it a very useful tool.  And July was the highest since Pioneer Title started providing it. WOW

The PTC Index is a monthly measurement of the vibrancy of the Treasure Valley real estate market. Based on a custom weighted algorithm, it combines nine critical measurements of the real estate market into a single, useful number: the PTC Index. To give you some perspective, when the market was at its most active point in 2005, the PTC Index average would have been 225. In January of 2010 we reached a low of 28. Though times have changed, the need for this data is greater than ever.

July 2012

Building Permits269
New Home Sales170
Existing Home Sales703
Average Sales Price163290.5
Financial-Bond Market(10-yr Treasury)1.53
Days on Market68.5
Distressed(Short Sales and REO)930
Notices of Default396
PTC Index244

The PTC Index this month reached an all-time record high of 244 points driven largely by a surge of refinance activity. Last month, refis surged by nearly 50% in July throughout the valley due to record-low rates over the last few months, along with the HARP 2.0 program with banks pushing streamlined rate reductions. Building permits remain consistent with only a slight increase of 1.5%, new home sales inching up by nearly 12%, and existing home sales falling by 10%. Distressed properties fell by 3% while Notices of Default increasing by nearly 16%.

How the Serenity Prayer Applies to Real Estate

You may be wary of either buying or selling a home in today’s market. You may feel powerless to the process. How could YOU possibly know whether the current good news about housing will continue? There is no doubt that today’s real estate market is extremely difficult to navigate. However, we want you to know that thousands of homes sold yesterday, thousands will sell today and thousands will sell each and every day from now until the end of the year.

It is totally within your power to decide whether it is the right time for you and your family to move. Even in the current market.

“How?” Let’s look at the simplicity of the famous Serenity Prayer and apply it to selling a home in today’s real estate market.

“God, grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”

Accept the things you cannot change

The two main concerns many talk about when discussing the housing market are:

  1. the current economy

  2. the election later this year

As an individual, there is very little you can do to impact either of those two situations (outside of voting on Election Day). The best think-tanks in the country are struggling to discover what impact each of these items have on real estate.

Have the courage to change the things you can

If you are a seller, there are plenty of buyers in the market for a home they consider priced correctly. You have to decide what the correct price is for your home if you truly want to sell. If you want your house sold, you must list it at a price a buyer will pay for it. Not a buyer from 2006 but today’s buyer who has plenty of homes from which to choose. It will take courage to sit with a real estate professional and honestly decipher the true value of your home. If you want to sell, you must have that courage.

If you are a buyer, and you believe now is the right time for your family to purchase a home – DO IT! Prices are back to pre-bubble prices and interest rates are at historic lows. That means that your monthly housing expense will be lower than any time in the last 50 years – and probably lower than your current rent payment.

The wisdom to know the difference

We all realize that the economic situation will take some time to correct. The question is whether or not it makes sense to delay moving on with your life until everything gets ‘better’. Should you not sell your home and delay reconnecting with friends and relatives that have all moved to another part of the country? Should you not buy a house and enable your kids to attend the school you have already decided is best for them? Should you spend another winter up north even though your doctor recommends you move to a climate better suited to your current medical situation?

This is where your wisdom must kick in. You already know the answers to the questions we just asked. You have the power to take back control of the situation by moving forward. The time has come for you and your family to move on and start living the life you desire. That is what is truly important.


Wednesday, August 22, 2012

Short Sale to get Faster

Short Sales to Get Faster With Fannie, Freddie


The Federal Housing Finance Agency announced Tuesday that it is issuing new guidelines that set out to more quickly qualify borrowers and speed up the short-sale process.

Among the new guidelines, home owners with a mortgage backed by Fannie Mae or Freddie Mac will be able to sell their home in a short sale even if they are current on their mortgage, assuming they can prove a hardship. Eligible hardships often include death of a borrower or co-borrower, divorce, disability, or job relocation (such as a job transfer or new employment 50 miles away from their current home).

The new FHFA guidelines also permit mortgage servicers to speed up the processing of short sales for borrowers with eligible hardships without needing additional approval from Fannie Mae or Freddie Mac.

“These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” FHFA Acting Director Edward J. DeMarco said in a public statement.

Also among the new guidelines:

-- Military service members who are being relocated will automatically be eligible for short sales, even if they are current on their mortgages.

-- Fannie Mae and Freddie Mac will waive the right to pursue deficiency judgments for borrowers who short sale who have sufficient income or assets and can make a financial contribution or sign a promissory note.

-- Freddie Mac and Fannie Mae will offer up to $6,000 to second lien holders in order to quicken the pace of a short sale. “Previously, second lien holders could slow down the short sale process by negotiating for higher amounts,” according to the FHFA.

The new guidelines will go into effect Nov. 1.

The National Association of REALTORS® worked with the FHFA and the government-sponsored enterprises in creating the new short sale guidelines. NAR applauded the FHFA’s approval of the guidelines.

“REALTORS® appreciate the FHFA’s efforts to increase the number of short sale approvals, which limit the losses incurred by home owners, lenders, the federal government and taxpayers,” says Moe Veissi, NAR president. “We hope these new guidelines will allow many more hardworking American home owners that would have previously been denied a short sale to now be approved and avoid defaulting on their mortgage loan.”


Friday, August 17, 2012

Supply vs Demand

If you read the last couple of posts you likely noted that the inventory levels are quite low in Ada County.  This report from KCM Blog speaks about the effect of supply and demand aspects.  That appreciation is guaranteed is mitigated in some part due to our continued high levels of distressed sales, although those numbers are reducing as well.

For some time now, we have attempted to shed light on the fact that pricing in today’s real estate market, as it is in the markets for every other saleable item, will be determined by the concept of ‘supply and demand’.

According to dictionary.com, “the relationship between supply and demand determines the price of a commodity. This relationship is thought to be the driving force in a free market.”

In real estate, supply and demand is represented as the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).

Most real estate professionals know, or at least have a good idea of, the month’s supply of inventory in their market. But why? Because of its affect on pricing moving forward.

While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline by which to go:

  1. 1-4 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.

  2. 5-6 months’ supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.

  3. 7-8 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.

When you discuss home values with either a seller or buyer, you should be prepared to show what the supply of, and demand for, homes is in the same category of home they are thinking of selling or buying. You should also be prepared to discuss any projected change in those numbers (such as a potential shadow inventory of distressed homes or a projected increase in demand because of a new plant opening).


Thursday, August 16, 2012

July Ada County Market Report in Pictures

Almost 10% increase YTD! 













Home values up 25% from January! 














Two months of increase helps our recovery continue. 













Continued improvement in all three measured areas. 


Wednesday, August 15, 2012

Ada County Real Estate Continues Climb

Ada County real estate market continues it’s blistering pace…

by marclebowitz

Sales in July 2012 were 633 in Ada County, an increase of 9.14% compared to July 2011.   Year-to-date sales are 3,975; 9.6% over the first seven months of 2011.

Dollar volume for July was up 21.67% to $129Mil. For the year we are at $775Mil.

New homes sold in July increased 69% over new homes sold in July of 2011!!…and are up 66% YTD.

Historically, July sales slow from June by 11%.  July 2012 sales decreased by 9% compared to July 2012.

Of our total sales in July… 24% were distressed (151 total sales)….down 4% from June 2012. In July 2011, 42% of our sales were distressed.  In January 56% of distressed properties were REOs and 44% were short sales.  In July the ratio was 67% short sales (101 total sales) and 33% REOs (49 total sales). This is four consecutive months with short sales being the larger percentage of distressed properties sold.

Pending sales at the end of July were 1,172; down 9% from the end of June. In general pending sales in May are the highest of the year; and June the second highest.  The percentage of pending sales in distress decreased 1% from June, totaling 26% overall. This is the lowest number we’ve seen in several years. A year ago we were averaging close to 50% of pendings in distress; but have decreased steadily since January.  Of Pending sales in distress, short sales outnumbered REO’s 3 to 1.

At the end of July, we had 25% more sales pending than at the end of July 2011.

July median home price was $173,000; up 14% from July 2011. Median home price is up 25% since January of this year and above $150,000 for six months running.  We continue to outpace our national recovery; according to NAR's most recent report.

New Homes median price for July was $211,681; no change from July 2011.

The number of houses available increased ever so slightly for the fourth consecutive month. At the end of July our total active inventory was 2,161 homes. This is up 5% from June and 15% less than last year at this time.

At the same time, the percentage of distressed active inventory dipped 2% to 24%. This is the lowest number we’ve seen in several years. We have been hovering between 33% and 36% for the last year. We remain well below the 40% levels set last spring….when we were on the increase.

With an inventory increasing and the percentage of distressed inventory decreasing; median home price will continue to strengthen.

Of our Distressed Inventory 90% is Short Sales and only 10% is REO; nearly unchanged from last month.

We increased available inventory in price ranges of <$120,000 to $300,000. Sales in the higher priced inventory $300,000 to $500,000 decreased by roughly 10%.

The number of available new homes increased in the price ranges of $120,000 to $160,000 by a total of 30 homes.

In Ada County we now have less than 3.3 months of inventory on hand.

The price category in shortest supply is <$119,000 with 2.1 months. In the range of $120,000 to $159,999 we have 2.5 months. All price points up to $400,000 have less than 4 month’s supply. We have benefited for nearly two years from inventory levels much lower than national average.

Multiple offers are much more prevalent; now becoming the norm.

Based on July sold data, our most desirable price point is $120,000 to $160,000 which was 27% of total sales. The next largest price point sold is $160,000 to $200,000 at 19% of all sales.

I’m still going to stick with my conservative forecast for the rest of the year; single digit sales increase and double digit median price increase.


Saturday, August 11, 2012

There is no 3.8% Real Estate Tax

You may have heard something about this tax business and here are the top 10 things you  need to know about the 3.8% Tax.  Courtesy of the National Association of Realtors.

  1. 1)  When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will NOT be subject to this tax.

  2. 2)  The 3.8% tax will NEVER be collected as a transfer tax on real estate of any type, so you’ll NEVER pay this tax at the time that you purchase a home or other investment property.

  3. 3)  You’ll NEVER pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.

  4. 4)  If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will NOT pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.

  5. 5)  The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).

  6. 6)  The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed.

  7. 7)  In any particular year, if you have NO income from capital gains, rents, interest or dividends, you’ll NEVER pay this tax, even if you have millions of dollars of other types of income.

  8. 8)  The formula that determines the amount of 3.8% tax due will ALWAYS protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8% tax. For example, if you are single and have a total of $201,000 income, the 3.8% tax would NEVER be imposed on more than $1000.

  9. 9)  It’s true that investment income from rents on an investment property could be subject to the 3.8% tax. BUT: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.

  10. 10)  The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. NAR strongly opposed the tax at the time, and remains hopeful that it will not go into effect. The tax will no doubt be debated during the upcoming tax reform debates in 2013.



Friday, August 10, 2012

Slow golfers and Beer Bellies

I was driving up in the Boise foothills above Quail Hollow Golf Course and noticed these couple of signs and they just hit me funny.So it just left me wondering with the fast golfers cross?

And then down the street I saw this sign and figured maybe that is why the golfers are so slow.

Thursday, August 9, 2012

Plumb, Level or Square

I received this from Stan Audette of the AAD Inspection Corporation. I found it kind of interesting so I have included it here.

Wednesday, August 8, 2012

The Economy's Impact on Housing

There is an old adage that all real estate is local but what about the economy? The national trends always play a roll, interest rates and exports but isn't the real impact of the economy local? When Micron or Hewlett Packard lays off workers it has a direct impact on the local economy.  What about housing?  Does the economy drive housing or does housing assist the economy? It appears to go both ways to me.  The following is a reprint of KCM Blog discussing this issue.

With the economic recovery sluggish at best, many ask what impact this has on housing. Over the last several years, most economists believed that housing would not recover until the overall economy recovered. However, it now seems that the housing sector may be a driving influence in the recovery.

Here are four reports released in the last 30 days affirming this point:

Morgan Stanley

“In terms of its contribution to real GDP, residential fixed investment has been a positive – albeit modest – force over the most recent four quarters, marking its longest span of back-to-back positive results since 2005.”

Deutsche Bank

“The [overall] resumption in residential activity cannot be understated as the long awaited housing recovery should help buoy consumer confidence and provide a mild lift to second half economic output after what was likely a disappointing first half of the year.”

Fannie Mae

“The data from the past month collectively point to decelerating economic growth, but growth nonetheless…However, despite signs of deteriorating momentum for economic activity, housing continues to be a bright spot as news from the housing market has been relatively upbeat,presenting a rare upside boost to the economy.”

Goldman Sachs

“As we look back at previous major housing recoveries, 1975 and 1991 began with negative jobs growth…In each case, the home sales recovery was fueled by home price improvement, driving new job growth and those jobs creating a fresh wave of demand that supported a multi-year recovery in housing.”

Is housing a victim to the current economic malaise? No. It may even be the cure.


Tuesday, August 7, 2012

Market Report for Ada County Real Estate

A follow up to yesterday's June Real Estate Market Report by Marc Lebowitz of the Ada County Association of Realtors.

Last week, with the June Market Report still buzzing in my head, I wrote to one of our favorite economists, Ken Fears at NAR.

I offered him a snapshot of what’s going on here in Ada County:

  • Sales are up strongly… +9.4% YTD combined new and existing

  • Median is up even more… +26% YTD

  • Inventory is at 2001 levels… 2,054 active single family homes… -29% from 2011.

  • Distressed properties as a percentage of “solds, pendings and active inventory” have improved from about 60% to below 30%.

  • Our unemployment has dropped from 10% to very near 8%.

Ken focuses on regional data, so I asked him if our sales volume was likely to continue at its current pace (+9.4% YTD) or slow down; if our median price could keep increasing the way it is (+26% YTD) and for any other insight he had for us.

Highlights of his reply include:

  • There has been a surge in interest from traditional owner-occupied demand in response to the record low mortgage rates

  • Current median increases are in part driven by the fact that the share of non-distressed properties is much higher implying that the weight of the price discount for distressed properties is playing a smaller role in the median price today than it was a year ago

  • Non-distressed prices are on the rise

  • Builders were caught on their heels and it will take time to move new production through the pipeline

  • The lack of inventory may cause some spikiness in prices, but appraisers are still pensive as are bank underwriters, so I would expect this trend to hit upward bounds fairly shortly

  • Strong trend price growth will help the market find a better balance by drawing in more supply as prices rise

All valid points, but I wondered a little more…

Our Valley has lost so many builders in the last three years that I worry that we’re not going to be able to build enough to keep up with the demand.

Isn’t a more likely scenario that homeowners like me will be able to make up the gap between what we owe on our homes and what they are worth?  My house lost value for each of the last 4 years.  But…with my most recent tax assessment it went up $15,000.  I asked Ken…”Does anyone know how much, on average, current homeowners will have to make up to be able to sell without paying to close?

According to CoreLogic:

“Of the 11.1 million upside-down borrowers, there are 6.7 million first liens without

home equity loans. This group of borrowers has an average mortgage balance of

$219,000 and is underwater by an average of $51,000 or an LTV ratio of 130 percent.

The remaining 4.4 million upside-down borrowers had both first and second liens.

Their average mortgage balance was $306,000 and they were upside down by an

average of $84,000 or a combined LTV of 138 percent.”

In a nut shell, prices would have to rise between 30 to 38% percent nationally.

Given the size of the loans, this likely isn’t reflective of Ada county or Boise; it is much more likely to reflect trends in California where the bulk of underwater borrowers are.

So what does that mean for Ada County?  We need another 12-14% in median price increase to free up those of us who bought in the last 5 years…and that’s going to take another year or two.  But, when it gets there…look out.  We’ll have a “move up” buyer group stronger than we’ve seen in a very long time.

Nearing the end of our conversation I asked Ken about a story I’d heard about median home price in which the reporter said “median price should be 3.5 times annual family median income”.   I looked at Boise numbers (which vary widely depending on who you ask) and found that our family median is between $47,898 and $67,000.

With those numbers, and the story’s premise, our sustainable median would be between $168,000 and $234,000.

“The problem with that premise”, said Ken “is that it doesn’t take into account the wildly low interest rates.   When that ratio was determined, rates were 5-6%; at 3% or less it just doesn’t work”.

Instead we have to look at monthly payment…and that’s another blog for another day.