Housing Most Affordable: May be Time to Move from Renting to Owning
by Phoebe Chongchua
Falling housing prices, historically low interest rates, and tax credits are creating an enticing environment for renters to convert to homeowners.
"We are still going to have a tremendous amount of foreclosures, price declines, and best opportunities to buy properties at amazing prices," says Bruce Norris of The Norris Group.
If that sounds like a mixed bag of bad and good, indeed it is. Consumers have been inundated with news about a troubled real estate market. "If you look at the closings for California, 55 percent or more closings every month are lender-owned properties; that ratio has never existed before. So, the lenders are really dictating the prices at this point and there are so many [lender-owned properties] that the appraiser almost has no choice but to give that comp a lot of credence," says Norris. But the good news, especially for those who have been wanting to take the plunge into homeownership is that markets across the country are ripe for choosing the most suitable home.
"The affordability has never been this high. So, in relationship to income, California is the cheapest it's ever been. The fact that prices will still go down kind of means nothing to the person who is going to live in a house for quite a long time -- partly because the interest rates are also historically low," says Norris.
He points to his own daughter as an example. She is getting married this year and buying her own house for the first time.
"I think it's a very bright decision. Do I think her neighborhood might go down for another year-and-a-half, yeah—and to that I say, who cares! She's tying up an interest rate that's probably under 5 percent for 30 years and that may be the real bargain," says Norris.
Her fiancé owns a home but Norris and the couple agreed that her buying a home now is a good opportunity. So after the couple marries they will live in the home in order to receive maximum financial benefits. His daughter is using an FHA loan and putting $4,000 down on a $110,000 California home that was, at the height of the real estate boom worth, $330,000. She will then get a federal tax credit for $8,000 and she can receive that money (in as few as 10 days) now rather than waiting until she files her 2009 tax return. Best of all, the mortgage [payment] is less than it would cost to rent.
This is a trend that is playing out in many areas across the country. "Fortunately, the interest rates are national so you have that incredible interest rate that is forcing the [mortgage] payment below rent in many locations, including California. So the area that my daughter is buying in, her rent would be $1,100 and her [mortgage] payment is going to be about $825," says Norris.
Norris says that, coupled with the federal tax credit for first-time homebuyers, is making renters weigh their options, "It really is an inducement for people to go from being a renter to an owner."
"There are lots of areas that didn't go up as much as California. Let's pick an area, Texas, for instance, you have houses selling for $110,000 to $120,000 range and the rents there are also pretty high--$1,100 - $1,200 or so—so payments there are also a lot less if they own it," says Norris.
"It's most affordable right now, so you would think that everybody would want in, but real estate right now has a lot of fear attached to it and a lot of uncertainty about jobs," says Norris.
Some markets such as California are working to help alleviate barriers to home ownership. The California Association of Realtors in April introduced the Housing Affordability Fund's Mortgage Protection Program. There are specific eligibility requirements; talk to your Realtor for details.
"People who buy property in 2009 have a safety blanket now of six months of up to $1,500 payments per month that the California Association of Realtors, out of some fund that it has, will pay the people's payments," says Norris. He adds, "I've never heard anything like it."
Norris says while these programs to entice renters to become buyers are attractive, he says make sure you're ready to buy. He says there are specific habits that you should have in place before buying a home.
"You should already have developed a savings habit and you're ready to buy a home because you have a little bit of money left over in case something goes wrong," says Norris.
Another affirming reason to move from renting to buying comes from statistics from John Burns Real Estate Consulting in Irvine, California.
The company reports that 50 percent of the 76 metropolitan area markets across the U.S. that are tracked show that people can buy a house (after tax cost of homeownership considered) for less than they could rent one.
Published: April 10, 2009
Thomas Merical
http://www.findahomesellahomenow.com/
Market Conditions
by Realty Times Staff
Most have heard about the $8,000 tax credit for first time homebuyers. Here are a few tips to see if you are eligible and how to go about claiming it.
According to the National Association of Home Builders, you must have purchased a home from January 1 to December 1 of this year. To be considered a first time homebuyer, however, you only need to have not owned a home in the last three years. This is great news for those who have bought before, but have been out of the homeownership game for a while. The buyer must also "have a modified adjusted gross income (MAGI) less than $95,000 for single tax payers or $170,000 for married filers."
To claim the credit, buyers complete IRS Form 5405 to calculate the amount of the tax credit, and enter it on line 69 of the IRS 1040 income tax return. And you can only make a claim once the purchase of the home is complete.
More information on the first-time home buyer tax credit can be found at www.federalhousingtaxcredit.com.
Published: April 10, 2009
Thomas Merical
http://www.findahomesellahomenow.com/
Keller Williams Gets Agents, Brokers On Same Side Of The Table
by Blanche Evans
Profitability is the issue for both brokers and agents. When one makes more, the other makes less. Agents negotiate for bigger portions of the commission, yet they want more service from the broker. The broker wants agents to sell more and to recommend in-house ancillary services to consumers.
Are they adversaries or partners in each other's success? Sometimes it's hard to tell from the bitterness they show one another. Is there a better way?
The Keller Williams business plan puts brokers and agents on the same side of the table instead of negotiating against each other, explains Dave Jenks, vice president of research and development and dean of the Keller Williams University.
"Sometimes where people miss the point is they don't take the big view," says Jenks. "They stay in the nuts and bolts. We are excited to give them a big-picture look at what can happen to them in their real estate career. The issue about ownership is wealthbuilding."
He says what prevents wealthbuilding is "Us VS Them" thinking.
"There are lots of complaints. I'm an agent and I think you are keeping too much of the money," explains Jenks. "I can go down the street, and it will cost me half as much to be there because of the commission split. You don't have enough staff. When I need a report or to put something in the MLS, I can't get it done. This software is crap. We need better software. We need better fliers and information in our listing packages. We need a four-color brochure about how we are better. I need someone to help me design my own personal marketing."
He continues, "A lot of traditional shops where owners keep more are starting to bill back, and the agent is saying you are nickel and diming me to death. You're ripping me off for all these bill-backs. Why should I have an individual card for long distance calls? I have customers trying to reach me at night - how come someone isn't here to answer the phone? I have been here seven years - why is my office so dinky? I need more space, and on and on."
Broker/owners have their complaints, too. "Agents don't appreciate what I do," Jenks mimics. "They waste materials. They beat up on the staff. I keep putting supplies of brochures and if I did a trunk check, I'd be able to collect 5000 brochures that are getting warped and wet. What is happening to our lockboxes? We have 200 active listings and 300 lockboxes are unaccounted for? Agents want ads - I need my agents to get more listings."
He says that if agents become owners, then they automatically want to be on the same side of the table as the broker/owner, especially while making decisions about how the brokerages' resources are spent.
"You need to let agents make decisions with you," suggests Jenks. "Brokers come up with a brilliant idea and change things in their office and change is always problematic if agents don't have a say."
Here's how the Keller Williams plan works. Agents are paid as agents, but they have a second revenue stream as recruiters. Agents are paid a percentage of the production of their recruits and their recruits' recruits - up to seven levels. The profits generated by the recruits can help pay agents beyond retirement and to the agents' heirs after death. Any significant decision at a Keller Williams office must be made with a board of directors consisting of the owners and the agent leaders because they are given a stake in the success of the office through recruiting and through ancillary services which they also own part of.
"You have to be in top 20 percent of producers in the company, so that the decision making body is made of the people who do the most in production. That makes a lot of sense," says Jenks
Then you have consensus between the owner and a body of agents, says Jenks. "The two things that I would say are fundamental is that the agent gets to keep more of the money, and if they have to spend money on their business, they get to choose how that money is spent."
He explains, "If you are looking at another model where the brokers keep more, they have agents who expect more to be done for them, and they are justifying to the agent 'That is the reason you want to be with us is because we do more for you. You don't get as much commission, but we reduce your costs.' We've found that the agent would rather spend the money than somebody else spend it for them. They get to promote themselves to a targeted client base instead of the company spending the money. They might spend the money differently, if it were their money to spend."
"They can't go spend the owner's money but the owner's decision needs to come by them when changes are made," suggests Jenks, "then it is the leaders of the council who bring the idea back to the sales meeting. 'Here's what we decided and why.' It is a good business decision-making system. It goes back to the original hook. It moves the agent more on the same side of the desk as the broker/owner and gives them a chance to understand why things are being run the way they are being run."
Jenks report that profit-sharing was way up this year. "Through October, last year, profit-sharing was $6.3 million," says Jenks, "and this year, it was $11.5 million, and it is on track to more than double in one year. Owner profits, and that is net profits (all losses against all gains) last year was $3.4 million. This year, it was $12.8 million. We have 284 offices. That's about $50,000 profit per office, but that figure includes all offices, including 70 offices that just opened this year that aren't profitable yet. Subtracting those losses, it is a net total."
He says, "The trend that is important is the increase from $3.4 to $12.8 million in losses against gains. The average office total profit was $101,000. The top 25 office made $380,000. If owner profits have gone up that much in one year, that means that more and more, our model is working for people."
So what are some ways brokers can get agents on the same side of the table?
"I call it the battle for company dollar and bottom line," says Jenks. "From an owner's point of view, that is what it is. You are battling how much can you justify having your agents pay you as a percent that you get to keep as company dollar and take the best to the bottom line. The struggle for most owners is the difficulty in getting agents to cooperate with them."
A big issue is who pays for consumables. Keller Williams solves the problem with transaction coordinators, graphic artists and other professionals whose job it is to take the contract to closing. But how do you handle the people who waste resources?
"This is a bill-back-for-service model," says Jenks. "The best offices are trying to run a similar model and we create an office environment where you can do that less expensively."
So how do you get rid of the us VS them attitude? "You have to get your leaders to understand and trust how you keep your books," suggests Jenks. "If they don't know, they can think whatever they want, they see the broker's success. If you are wiling to open your books and let them take a part in the finances of the company. the best producers will be the opinion leaders, and second you have to give them a reason to care. It is a relationship-based business. Owners who are respected and loved and trusted by agents have built an environment where agents aren't working against them. It helps to give them a tangible financial reason to care about profitability of office. That is where sharing of profits gives that tangible evidence."
Advises Jenks, "Another way is to teach them to run their practice like a business. As an owner, if you will step up and say, 'My goal is to help you build your practice and I'll teach you how to do it.' Then take them as far as you can."
Published: December 18, 2003
Thomas Merical
http://www.findahomesellahomenow.com/
Investor Report: Strong Segment of Market
by Kenneth R. Harney
Purchases of houses for investment purposes continued to be among the strongest segments of the real estate market last year -- and accounted for more than one out of five of all home sales in 2008.
That's a key finding of the latest annual study on second homes and investment purchases conducted by the National Association of Realtors.
The investor market share last year was 21 percent, the same as the year before, but down several points from the height of the housing boom in 2005 when it hit an all-time record of 28 percent.
Second homes and vacation property purchases, on the other hand, dropped last year to just 9 percent of the total market, down from 14 percent in 2006 and 12 percent in 2007.
What sort of properties were investors buying for rentals? Two out of three were detached single family units last year, while 22 percent were condos or duplexes. Eight percent were attached townhouses or rowhouses.
Investors kept their purchases pretty close to their home base -- following the long-standing rule -- “invest where you know the local market best.” Fifty four percent of all investment houses were located within 20 miles of the investor's own home, and roughly two out of three were within 50 miles.
Investors also opted for considerably lower priced properties last year. The median sale price of a rental unit in 2008 was $108,000, according to the Realtors study. That compares with a $196,000 median for primary residences and $150,000 for second home and vacation properties.
During the boom years, by contrast, investors tended to buy much higher priced units, a median of $189.000 in 2004 compared with a median of $204,000 for vacation units.
Given last year's credit crunch, more investors apparently avoided banks and mortgages altogether. Forty two percent paid all cash for their purchases, versus just 15 percent of buyers of primary residences and 31 percent of vacation home buyers.
Far larger numbers of investors bought their units in distress situations -- one out of six was a foreclosure or trustees sale -- which is no surprise given the huge numbers of R-E-O and auctions that dominated many local markets.
So what did the typical investor look like last year? They tend to be older -- with a median age of 47 years compared with 37 for primary residence buyers.
But interestingly, they were not wealthier than other buyers. In fact, second and vacation home buyers had higher median household incomes -- $97,000 - compared with $85,000 for investors.
Published: April 3, 2009
Thomas Merical
http://www.findahomesellahomenow.com/
Mortgage Rates Fall Again This Week, Hitting Another Record-Breaking Low
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 4.78 percent with an average 0.7 point for the week ending April 2, 2009, down from last week when it averaged 4.85 percent. Last year at this time, the 30-year FRM averaged 5.88 percent. The 30-year FRM has not been lower in the life of Freddie Mac’s weekly survey, which dates back to 1971 for the 30-year FRM.
The 15-year FRM this week averaged 4.52 percent with an average 0.7 point, down from last week when it averaged 4.58 percent. A year ago at this time, the 15-year FRM averaged 5.42 percent. The 15-year FRM has never been lower in the life of Freddie Mac’s weekly survey, which dates back to 1991 for the 15-year FRM.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.92 percent this week, with an average 0.7 point, down from last week when it averaged 4.96 percent. A year ago, the 5-year ARM averaged 5.59 percent. The 5-year ARM has never been lower in the life of Freddie Mac’s weekly survey, which dates back to 2005 for the 5-year ARM.
One-year Treasury-indexed ARMs averaged 4.75 percent this week with an average 0.6 point, down from last week when it averaged 4.85 percent. At this time last year, the 1-year ARM averaged 5.19 percent. The 1-year ARM has not been lower since the week ending September 29, 2005, when it averaged 4.68 percent.
“Mortgage rates followed other interest rates lower this week amid reports of slower economic growth” said Frank Nothaft, Freddie Mac vice president and chief economist. “The final estimate of economic growth in the fourth quarter was revised lower and personal incomes fell 0.2 percent in February, below the market consensus."
“On a positive note, pending existing home sales rose 2.1 percent in February, marking the second increase in three months as potential homebuyers are taking advantage of historically low mortgage rates and falling home prices. Serving as a spur to sales, housing affordability reached an all-time high in February 2009 since the series' inception in 1971, according to the National Association of Realtors®. By region, sales surged by nearly a third in the Northeast and Midwest, but fell in the West.”
Published: April 3, 2009
Thomas Merical
http://www.findahomesellahomenow.com/
CEO Keller Williams Fairfax Gateway
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