Wednesday, January 30, 2008
Is 2008 a Good Year to Buy?
Dear Sue,
There are so many buying opportunities out there! Short sales, foreclosures, and deeply discounted new homes.
On one hand I think that I should buy everything I can get my hands on. But for some reason I have no sense of urgency. There’s so much to choose from. It seems like I have plenty of time.
Do you think prices will come down even more? I don’t even know if buying a home is a good idea. Every home owner I know right now has lost huge amounts of equity. What are your thoughts?
Wondering Wanda
Dear Wanda,
California experienced a phenomenal and unprecedented home buying frenzy beginning in 2000 and peaking in 2005. Buyers were frantically pushing prices up by offering more than the sellers were asking because buyers were afraid that if they didn’t buy now they would end up paying more later or worse yet, not be able to find anything at all. In many areas home prices actually tripled in that five year period alone.
Opportunists came out of the woodwork. “Flipping” became a household word. Flippers were turning properties over within days for sizable profits.
The incredible demand ate up the inventory. Properties were sold within hours of hitting the market. Multiple offers were the norm. Buyers were eager to out bid one another to get the coveted property.
Easy, no money down financing fueled the buying frenzy. Imagine buying something with no money down and walking away with thousands of dollars in profits. Designer loans that didn’t require documentation and unverified stated income loans ruled. One could state that he or she made $10,000 per month and presto, one got the loan. Some designer loans were 125% loan to value. Yes, the buyers were actually paid up to 25% over the homes value to get the loan.
As you have noticed, things are definitely different today. There’s a saying that what goes up must come down. Such an extreme and rapidly rising market could only be corrected by the equally extreme and opposite market conditions we are experiencing now.
Even though the markets yesterday and today are opposites, the forces driving those markets are the same. The primary force is demand. Demand is only fueled by financing. The feds are doing their best to make financing available. They are making it more affordable by lowering interest rates and bringing more money into the markets. The Government is also freezing the rates on currently held adjustable rate mortgages and new borrowers must meet stricter qualifications, all lending stability to the market.
The second big force, supply, has currently overwhelmed the demand. This too will correct itself in time as it always has. Remember how people felt during the recent “boom” time? They thought it would never end. Now people feel like this “slump” will never end. But it will.
According to www.housingmarketfacts.com, a national study indicates that on average, homes double in value every 10 years. The net worth of a homeowner is likely to be 46 times that of a renter. 60% of a homeowner’s net worth is in equity. I believe that California statistics are probably higher. In my mind these facts are the answer to all of your questions.
Understanding the ups and downs of the real estate market and commitment to long-term ownership are matters of good Home &&s and Sense.
There are so many buying opportunities out there! Short sales, foreclosures, and deeply discounted new homes.
On one hand I think that I should buy everything I can get my hands on. But for some reason I have no sense of urgency. There’s so much to choose from. It seems like I have plenty of time.
Do you think prices will come down even more? I don’t even know if buying a home is a good idea. Every home owner I know right now has lost huge amounts of equity. What are your thoughts?
Wondering Wanda
Dear Wanda,
California experienced a phenomenal and unprecedented home buying frenzy beginning in 2000 and peaking in 2005. Buyers were frantically pushing prices up by offering more than the sellers were asking because buyers were afraid that if they didn’t buy now they would end up paying more later or worse yet, not be able to find anything at all. In many areas home prices actually tripled in that five year period alone.
Opportunists came out of the woodwork. “Flipping” became a household word. Flippers were turning properties over within days for sizable profits.
The incredible demand ate up the inventory. Properties were sold within hours of hitting the market. Multiple offers were the norm. Buyers were eager to out bid one another to get the coveted property.
Easy, no money down financing fueled the buying frenzy. Imagine buying something with no money down and walking away with thousands of dollars in profits. Designer loans that didn’t require documentation and unverified stated income loans ruled. One could state that he or she made $10,000 per month and presto, one got the loan. Some designer loans were 125% loan to value. Yes, the buyers were actually paid up to 25% over the homes value to get the loan.
As you have noticed, things are definitely different today. There’s a saying that what goes up must come down. Such an extreme and rapidly rising market could only be corrected by the equally extreme and opposite market conditions we are experiencing now.
Even though the markets yesterday and today are opposites, the forces driving those markets are the same. The primary force is demand. Demand is only fueled by financing. The feds are doing their best to make financing available. They are making it more affordable by lowering interest rates and bringing more money into the markets. The Government is also freezing the rates on currently held adjustable rate mortgages and new borrowers must meet stricter qualifications, all lending stability to the market.
The second big force, supply, has currently overwhelmed the demand. This too will correct itself in time as it always has. Remember how people felt during the recent “boom” time? They thought it would never end. Now people feel like this “slump” will never end. But it will.
According to www.housingmarketfacts.com, a national study indicates that on average, homes double in value every 10 years. The net worth of a homeowner is likely to be 46 times that of a renter. 60% of a homeowner’s net worth is in equity. I believe that California statistics are probably higher. In my mind these facts are the answer to all of your questions.
Understanding the ups and downs of the real estate market and commitment to long-term ownership are matters of good Home &&s and Sense.
Today’s New Home Trends
Dear Sue,
As a builder I want to do some research on what buyers are expecting to find in a new home.
Since building is a little off right now, I have time to gather information and do some planning before I launch my next project.
So Sue, what do today’s buyers want to see in a new home?
Curious Cal
Dear Cal,
When fisherman can’t go to sea they repair their nets. I think that it is great that you want to put some time into planning and preparing.
With headlines about global warming, rising fuel prices and going green, environmental concerns and energy conservation are at the forefront of public consciousness. Today’s buyers are looking for homes that are energy efficient. They are also looking for homes that are built with materials that have less environmental impact including materials that have been recycled.
Recycled and sustainable materials are creating a new aesthetic sacrificing nothing to beauty and function. For example, recycled glass and wood are being made into amazing surfaces. Responsibly harvested material like bamboo is surprisingly beautiful.
Today buyers are also looking for open multi purpose spaces. Formal rooms are becoming a thing of the past.
The kitchen is the most highly valued room in the house. Today‘s buyer prefers a large kitchen open to other living spaces. Buyers expect the kitchen to be high-tech. By that I mean wall mounted high-def flat screen TV’s. Stainless and granite are no longer all the rage.
Functional outdoor living space is in high demand especially for the upscale buyer. Out door kitchens and fireplaces are on the top of the list. Fortunately for a builder, outdoor living spaces are a relatively inexpensive way to add space to a home.
According to the National Association of Realtors, 60% of 2530 buyers surveyed said a garage with two or more spaces was very important to them. The garage is becoming an extension of the home. Buyers see it as flexible space that can be used for many different purposes.
Building a green home with an open high-tech kitchen, flexible space, outdoor living and generous garage is a matter of good Home $$s and Sense.
As a builder I want to do some research on what buyers are expecting to find in a new home.
Since building is a little off right now, I have time to gather information and do some planning before I launch my next project.
So Sue, what do today’s buyers want to see in a new home?
Curious Cal
Dear Cal,
When fisherman can’t go to sea they repair their nets. I think that it is great that you want to put some time into planning and preparing.
With headlines about global warming, rising fuel prices and going green, environmental concerns and energy conservation are at the forefront of public consciousness. Today’s buyers are looking for homes that are energy efficient. They are also looking for homes that are built with materials that have less environmental impact including materials that have been recycled.
Recycled and sustainable materials are creating a new aesthetic sacrificing nothing to beauty and function. For example, recycled glass and wood are being made into amazing surfaces. Responsibly harvested material like bamboo is surprisingly beautiful.
Today buyers are also looking for open multi purpose spaces. Formal rooms are becoming a thing of the past.
The kitchen is the most highly valued room in the house. Today‘s buyer prefers a large kitchen open to other living spaces. Buyers expect the kitchen to be high-tech. By that I mean wall mounted high-def flat screen TV’s. Stainless and granite are no longer all the rage.
Functional outdoor living space is in high demand especially for the upscale buyer. Out door kitchens and fireplaces are on the top of the list. Fortunately for a builder, outdoor living spaces are a relatively inexpensive way to add space to a home.
According to the National Association of Realtors, 60% of 2530 buyers surveyed said a garage with two or more spaces was very important to them. The garage is becoming an extension of the home. Buyers see it as flexible space that can be used for many different purposes.
Building a green home with an open high-tech kitchen, flexible space, outdoor living and generous garage is a matter of good Home $$s and Sense.
Thursday, January 17, 2008
Is a Reverse Mortgage Good for You?
Dear Sue,
I get daily phone calls and mailers up the kazoo bombarding me with offers for a reverse mortgage. I am seventy-six years old and do not even know what this type of loan is.
These sales people make this kind of loan sound so flowery. I don’t want to end up with weeds. Can you explain a reverse mortgage to me, Sue?
Suspicious Sally
Dear Sally,
A reverse mortgage is when the lender pays a sum of money to a borrower based on their home’s equity. The reverse mortgage eliminates any current mortgage payable on the home and instead pays a lump sum or a fixed monthly amount. The loan is repaid when the borrowers move or die. This is accomplished through the sale of the home.
As our population matures, more and more people are able to qualify for the reverse age requirement of 62 or older.
The National Reverse Mortgage Lenders Association estimates that there is $4.3 trillion of equity that Americans in this age group have in their homes. In fact, over the past five years, more than 300,000 reverse mortgages have been originated in the United States. This number represents less than one percent of the reverse mortgage market potential.
No wonder you have been bombarded with offers for a reverse mortgage!
Research shows that a reverse mortgage can be great for some and not so great for others. It depends on several factors especially one’s needs. Seniors with a fixed income hammered by inflation and not wanting to leave their home are perfect candidates. A possible downside of a reverse mortgage is the inability to pass the now encumbered home onto one’s heirs.
Good credit is not a consideration when applying for a reverse mortgage. Along with the age requirement of 62 or older, one must occupy the home as a primary residence.
The home also needs to pass an inspection. If repairs are required, they are usually paid for from the proceeds of the loan.
Ninety percent of reverse mortgage loans are federally insured and generally less expensive than those that are provided by banks and other private lenders.
Borrowers applying for an insured or HUD backed loan are required to go through a counseling program administered by a certified reverse mortgage counselor to ensure that they understand the terms of the loan.
There are a few websites where you can learn more about reverse mortgages:
www.arp.org/moneey/revmort
www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm
www.reversemprtgage.org
www.bestreversemortgage.com
I always recommend that one consult with a trusted financial advisor before entering into any type of financial agreements including loans. Once you have all the facts to make an informed decision, a reverse mortgage could be a matter of Good Home $$s and Sense.
Dear Sue,
I get daily phone calls and mailers up the kazoo bombarding me with offers for a reverse mortgage. I am seventy-six years old and do not even know what this type of loan is.
These sales people make this kind of loan sound so flowery. I don’t want to end up with weeds. Can you explain a reverse mortgage to me, Sue?
Suspicious Sally
Dear Sally,
A reverse mortgage is when the lender pays a sum of money to a borrower based on their home’s equity. The reverse mortgage eliminates any current mortgage payable on the home and instead pays a lump sum or a fixed monthly amount. The loan is repaid when the borrowers move or die. This is accomplished through the sale of the home.
As our population matures, more and more people are able to qualify for the reverse age requirement of 62 or older.
The National Reverse Mortgage Lenders Association estimates that there is $4.3 trillion of equity that Americans in this age group have in their homes. In fact, over the past five years, more than 300,000 reverse mortgages have been originated in the United States. This number represents less than one percent of the reverse mortgage market potential.
No wonder you have been bombarded with offers for a reverse mortgage!
Research shows that a reverse mortgage can be great for some and not so great for others. It depends on several factors especially one’s needs. Seniors with a fixed income hammered by inflation and not wanting to leave their home are perfect candidates. A possible downside of a reverse mortgage is the inability to pass the now encumbered home onto one’s heirs.
Good credit is not a consideration when applying for a reverse mortgage. Along with the age requirement of 62 or older, one must occupy the home as a primary residence.
The home also needs to pass an inspection. If repairs are required, they are usually paid for from the proceeds of the loan.
Ninety percent of reverse mortgage loans are federally insured and generally less expensive than those that are provided by banks and other private lenders.
Borrowers applying for an insured or HUD backed loan are required to go through a counseling program administered by a certified reverse mortgage counselor to ensure that they understand the terms of the loan.
There are a few websites where you can learn more about reverse mortgages:
www.arp.org/moneey/revmort
www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm
www.reversemprtgage.org
www.bestreversemortgage.com
I always recommend that one consult with a trusted financial advisor before entering into any type of financial agreements including loans. Once you have all the facts to make an informed decision, a reverse mortgage could be a matter of Good Home $$s and Sense.
Labels: reverse mortgage
Wednesday, January 9, 2008
Now is the time to Buy!
Dear Sue,
My girlfriend and I have been renting an apartment together for the last three years. We both have great jobs and we save our money. My grandmother left me a sizable inheritance last year. We want to buy a house but her parents are telling us to wait because they believe that home prices are going to drop even more.
We are tired of waiting and want to get this party started but we don’t want to be stupid either. My aunt suggested that I get your opinion.
Eager Ed
Dear Ed,
The real estate market is big news right now. We have all seen the headlines, “Record Foreclosures, Sub prime Meltdown, Local Builders Filing Bankruptcy,” you name it. Most of what we see in the media is presented from a negative perspective.
If we look at the same information from a buyer’s point of view, much of what’s going on is positive. The current high inventory of available homes for sale represents competitive pricing and more choices for the buyer.
Interest rates are historically low. They have been hovering at 6%. This is great news for buyers. If you have good credit and the ability to repay you’re in great shape.
Foreclosures are excellent investment opportunities. They are generally priced well below resale competition. Dealing with a lender owned property is much easier than dealing with an emotionally attached home seller.
According to an article written December 30, in the L.A. Times, sales of existing and new homes in 2007 totaled an estimated 6.5 million units, which would make it the fifth-largest sales year in U.S. real estate history. If this trend continues there will soon be a shift towards a more balanced market.
Kenneth R. Harney, a writer for the Washington Post said it best. “At some point in every correction cycle, even in the most depressed markets, consumer psychology begins to change. People who need or want houses look around, see lower prices, affordable financing and say, ‘Hey, this is a smart time to buy:’ The cycle has done its work.”
I believe that this psychology has begun to take hold in our local market. I believe that it is a very smart time to buy. When you see headlines that say it’s a smart time to buy, it’s usually too late!
Buy now. It’s a matter of good Home $$s and Sense.
My girlfriend and I have been renting an apartment together for the last three years. We both have great jobs and we save our money. My grandmother left me a sizable inheritance last year. We want to buy a house but her parents are telling us to wait because they believe that home prices are going to drop even more.
We are tired of waiting and want to get this party started but we don’t want to be stupid either. My aunt suggested that I get your opinion.
Eager Ed
Dear Ed,
The real estate market is big news right now. We have all seen the headlines, “Record Foreclosures, Sub prime Meltdown, Local Builders Filing Bankruptcy,” you name it. Most of what we see in the media is presented from a negative perspective.
If we look at the same information from a buyer’s point of view, much of what’s going on is positive. The current high inventory of available homes for sale represents competitive pricing and more choices for the buyer.
Interest rates are historically low. They have been hovering at 6%. This is great news for buyers. If you have good credit and the ability to repay you’re in great shape.
Foreclosures are excellent investment opportunities. They are generally priced well below resale competition. Dealing with a lender owned property is much easier than dealing with an emotionally attached home seller.
According to an article written December 30, in the L.A. Times, sales of existing and new homes in 2007 totaled an estimated 6.5 million units, which would make it the fifth-largest sales year in U.S. real estate history. If this trend continues there will soon be a shift towards a more balanced market.
Kenneth R. Harney, a writer for the Washington Post said it best. “At some point in every correction cycle, even in the most depressed markets, consumer psychology begins to change. People who need or want houses look around, see lower prices, affordable financing and say, ‘Hey, this is a smart time to buy:’ The cycle has done its work.”
I believe that this psychology has begun to take hold in our local market. I believe that it is a very smart time to buy. When you see headlines that say it’s a smart time to buy, it’s usually too late!
Buy now. It’s a matter of good Home $$s and Sense.
Labels: buy now, real estate market
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