Real Estate Report

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Jobless Recovery

We have been watching the markets and there is no doubt that they are speaking loudly. Since peaking this spring, the stock market is down approximately 15.0%. Oil prices have also fallen within the same range. Meanwhile, rates have moved down to the levels seen right after the financial crisis hit the markets some 18 months ago. What are the markets saying? The economy is slowing down. Some are still predicting a 'double dip' recession and certainly the market reaction is strong enough for some to draw that conclusion. One thing is for sure, creating private sector jobs at under 100,000 per month is not strong enough to help us recover from the loss of millions of jobs we experienced during the recession. Job growth must be stronger. Is this possible? Last week we talked about the Fed being out of bullets. There is no doubt that removing the housing tax credit as well as other fiscal stimulus is contributing to the current slowdown. States and local governments are cutting jobs because aid from the Federal Government is waning. However, don’t think that the entire stimulus has disappeared. Many aspects of the stimulus package will be hitting this summer as pointed out in a recent article from CNN/Money: 'This summer will be the peak of the $787 billion stimulus program in terms of creating jobs and pumping money into the economy. In fact, the Obama administration is calling it the Summer of Recovery because more than 30,000 miles of highways are being improved, more than 2,800 water projects have been started and 120,000 homes will be weatherized.' We obviously could use the work. In the meantime, record low rates on home loans should con tinue to stimulate housing in the wake of the tax credit’s expiration The National Association of Home Builders (NAHB) is reporting that after growing in square footage for nearly three decades, the average floor space of the single-family home is now reducing. In 2007, the average single-family home in the United States peaked at 2,521 square feet. That number did not vary greatly into 2008. However, according to a 2009 report from the Census Bureau, it’s now at an average of 2,438 square feet. 'The decline of the early 1980s turned out to be temporary, but this time the decline is related to phenomena such as an increased share of first-time home buyers, a desire to keep energy costs down, smaller amounts of equity in existing homes to roll into the next home, tighter credit standards and less focus on the investment component of buying a home,' said NAHB Chief Economist David Crowe, in a statement . 'Many of these tendencies are likely to persist and continue affecting the new home market for an extended period.' The report adds that fewer bedrooms and bathrooms are being built into houses. The Census numbers are based on housing completions, the NAHB adds. Source: HousingWire Foreclosures accounted for a third of all sales — and sold at a nearly 30% discount — during the first three months of 2010. According to a new report from RealtyTrac, the marketer of foreclosed properties, 31% of all sales were foreclosures. And homebuyers purchasing those properties paid a whopping 27% less, on average, compared to sales of non-distressed homes. These foreclosure sales include properties sold in short sales or after a bank repossession, known as REOs in industry terms. It does not include transfers from borrowers to banks, as in a sheriff’s auction. REOs, those homes already taken back from borrowers, commanded lower prices than short sales and other pre-foreclosures. The average REO sold for 34% less than conventional sales while pre-foreclosures averaged only 15% less. Part of the reason for the bigger price cut for REOs is that many of them come to the market in poor condition, t heir previous owners either unable to or unwilling to maintain them. Source: CNN/Money Home owners who have been trying to sell their properties for a year or more might consider lease or a rent-to-own option. A lease option agreement gives the tenant the option to buy at a predetermined price for a rent that is slightly higher than market. In a lease purchase, a buyer commits to buying the property. In exchange, the seller credits a percentage of each payment toward the purchase price. Either arrangement is likely to attract serious renters who would like to buy the property if they can. In exchange, they’ll take good care of it. Negotiating these agreements can be tricky, and the owner should always get help from a real estate attorney. Source: The Wall Street Journal


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