More and more homeowners are questioning whether they should keep their homes on the market or wait until next year to sell. The thinking obviously is that next year the market will be better and therefore they will be able to garner a higher price. But, is that true? Is there any evidence that the market will come roaring back next spring? The evidence actually points to the exact opposite. Most experts are predicting that we will not see appreciation until the end of 2012 and even then the appreciation will be minimal.
The MacroMarkets LLC co-founder and Chief Economist is Robert Shiller, the founder of the S&P Case Shiller Report. Professor Shiller surveys 109 economists, real estate experts, investment and market strategists each month for the their Home Price Expectations Survey. In the July survey, it was reported:
“The consensus indicates diminished confidence in the prospects for a near term recovery … This month, 60% of the panelists projected negative home price growth for 2010.”
When exploring your options for financing today, I believe everyone should at least consider an FHA Mortgage. Today, I want to tell you why:
1. Loan Amounts
The loan amounts available (especially in High Cost Areas, like mine) are on a par with Conventional Financing. In the past, FHA programs were typically only made available to the more low-to-moderate housing price ranges. Now, practically every community can enjoy the benefits of FHA financing.
2. Old Stigmas Are No Longer True
It used to be that “FHA takes Longer” or “FHA loans are more expensive” or “FHA has tougher appraisal guidelines”. Over the past few years, FHA has given more and more responsibility to its Direct Endorsed Lenders in the underwriting arena. Additionally, the Secondary Market has worked to price Mortgage Backed Securities for FHA loans more aggressively. There is now little difference in turnaround times, pricing, and appraisal issues between FHA and any other loan product.
3. Minimum Down Payment
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The big question about shadow inventory is when this backlog of foreclosures will come to market. Prices will not be adversely affected until these distressed properties are actually put up for sale. Only then will they truly be competition to existing homes for sale. It seems that day may be upon us.
Much of the main stream media are concentrating on two major changes which are occurring in the foreclosure numbers:
- Foreclosure filings by banks are decreasing
- Homeowners who are falling behind on their mortgage payments are decreasing
What the media has not concentrated on is that the number of homes banks are actually repossessing (REOs) is up 38% over last year.
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Homeownership almost seems like a dirty word in today’s society. People are blogging, tweeting and facebooking their belief that buying a home is just plain stupid. I respect their opinion on the issue though I totally disagree. Why?
This might be the best time to buy a home in American real estate history.
Some might think I’m crazy. Cynics might think that I am saying this because I still hold a real estate license (though I have not listed nor sold a home in ten years). My reason for saying it is actually quite simple. Owning a home makes more sense than not owning a home for the vast majority of families in this country. Let me give you five reasons why.
1. Real Estate is a Great Long Term Investment
Don’t take my word on this. This is what Mike Mandel, former chief economist at BusinessWeek and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say:
We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, real estate has still greatly outperformed the stock market over the past ten years.
Below is his chart actually showing the difference between real estate and the stock market.
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One of the most difficult things to do if you are thinking of buying or selling a home is to navigate through the sea of information available today. If we google “real estate” there are approximately 441 million sites. That’s 441 MILLION!!
Other searches you might try:
- “real estate information” – 277 million sites
- “selling a home” – 55+ million sites
- “buying a home” – 76+ million sites
- “what is my home worth?” – 73+ million sites
The amount of information seems endless even if you narrow the search dramatically. Google “Montana real estate” and you get over 31 million sites. That equates to 75,000 real estate web sites for each residence in the state!
What you find on the best of sites can also be confusing. Time.com recently had these two article titles listed at the same time on front page of their real estate section:
- New data say house prices may be nearing a bottom.
- House prices keep dropping and they’re not done yet.
Same source, same day, two articles saying exactly opposite things!
What should you do?
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People often ask us where they can see Steve deliver his message in a live forum. Though most of Steve’s speaking engagements are private events, here are five events which have open registration. Click on banners below for more information. - KCM Crew
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I made a comment a few weeks ago that the only thing that will bring the housing market back is honesty. It was a simple statement; unplanned and unrehearsed. It sort of just fell out of my mouth. I didn’t think much of it even after I said it. I was shocked at how it resonated amongst those who heard it.
It flew through twitter tweets. Friends on facebook continued to share it and re-share it. I was amazed. I decided to look deeper into why such a simple statement could actually impact so many. It was then that I realized that honesty was exactly what was missing in the real estate market for several years.
For years, many buyers weren’t honest about their income and some loan officers didn’t care. The loans were bundled by Wall Street and sold to investors who were told anything but the truth about their value. For years, some real estate professionals prodded appraisers to move that appraisal up ‘just a bit’ and most sellers thanked them for it. The housing bubble was created on a bed of dishonesty. I’m not saying that any group was malicious in their intent. Everyone probably believed that it would all work out in the end. But, it didn’t.
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We are bombarded constantly about how important our credit score is. What do we actually need to know? We asked our ‘resident expert’, Dean Hartman, to shed some light on the matter. – The KCM Crew
Everyone knows that you need a good credit score to get a mortgage. Most even know that your score will affect the rate and fees you pay for your loan; but few are aware that your credit score also is a determinant of your homeowners’ and auto insurance rates and a myriad of other things.
Simply put, your FICO Score has a huge impact on your financial life. So, how can we get the best possible score?
There are five components to your score:
1. Your Credit History makes up 35% of your score.
This is obvious. How you have paid your responsibilities before is a good predictor of how you will pay them in the future. While your credit profile will look back seven years, the most weight is given to your activity and performance over the last 24 months. Here’s a little known tip about your credit. Let’s say, you have a “charge off” for a cell phone bill you didn’t pay 5 years ago. Today, that “charge off” has little impact on your score. Many people, as they prepare to buy a home, will just pay the “charge off” to clean up their credit report. Makes sense, doesn’t it? However, by doing this, you will move the activity on the “charge off” to now (which is in the two year window), actually lowering your score. Before you do anything like this, talk to your mortgage professional!
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We always want to make sure that we get at least a fair price for anything we are selling. Truth be told, we hope we get top dollar and would not be upset if a buyer was willing to pay a premium above that. The same dynamics come into place when we are selling a home. We want at least a fair price. We usually list our house for a price above that hoping to either find a buyer willing to overpay or, at least, leave ourselves with some room to negotiate.
That is a dangerous strategy in today’s real estate market. The concept above depends on one of two things:
- Prices are stable and, if I do have to lower my asking price at some future point in time, I will still be able to sell it for today’s current value.
- Prices are appreciating and, if I can’t get my price right now, I just have to wait until the market catches up.
Neither one of those scenarios exist today. Individual home prices are decreasing in almost every market and as we move forward depreciation will actually accelerate. All pricing is dependent on supply and demand. Let’s look at how both will impact prices as we go through the next few months.
DEMAND
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You might think that home values are on the rise if you read the headlines this week. It seems that almost every home pricing index is showing an increase over prices last year:
- The latest S&P Case Shiller Index showed a year-over-year increase of 3.8%
- Core Logic put the number at +2.6%
- The RPX index showed a 2% increase
This may lead you to believe that the housing market is finally coming back and home values will again start seeing signs of greater appreciation. However, before we get too far down that road, let’s take a closer look at what each of the above mentioned reports have to say about future prices.
The S&P Case Shiller Index
“Other housing data confirm the large impact, and likely near-future pullback, of the federal program. Recently released data for May 2010 show sharp declines in existing and new home sales and housing starts. Inventory data and foreclosure activity have not shown any signs of improvement.”
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