Existing Home Sales Fall Unexpectedly

This is the headline currently on CNBC. And the headline says it all. Who would have thought 6 months ago that a fall in existing home sales at this point would be UNexpected?

You see, existing home sales have risen every month for the past 5 months. The government's $8,000 first time buyer tax credit threw gasoline on the fire of an already pent-up demand, and people have bought in droves in the past 5 months. Then, August sales figures come out and are down 2.7%.

Again, the headline says it all. A year ago, we thought the housing market would never stop declining, but now a small decline is actually a surprise. The talking heads are even saying the decline could be due to the fact that all the inventory under $250,000 is sold (to the first time buyers).

It seems a consensus opinion now that housing has bottomed. Your home has stopped going down in value! Enjoy this moment! What the 2.7% decline should remind us is what I've been saying all along...get ready for an UNDRAMATIC recovery.

There will be no V-shaped recovery in home prices. We may have hit bottom, but get ready to bounce along the bottom for longer than anyone thinks or wants. Home price appreciation will likely be subdued for the next 5 years or more, as we await a more full economic recovery that's only just begun, and don't forget that everything ABOVE $250,000 in housing is still challenged.

Yes, it will be long and undramatic. But I for one am pleased that my home has stopped depreciating. With a much-reduced risk of home price depreciation going forward, home ownership has again become a no-brainer good financial decision, regardless of how slowly the home appreciates in value, just for the tax benefits and for the joy of owning your home over renting one.

Congress bars banks from real estate brokerage. Thank God!

From the National Association of Realtors:

"President Barack Obama signed a bill into law Wednesday that permanently prohibits banks from entering the real estate brokerage and management business.
The bill--H.R. 1105, the Omnibus Appropriations Bill--ends the National Association of REALTORS' nearly eight-year battle to preserve the separation between banking and commerce.
"If banks had been allowed to engage in real estate brokerage, it would have created anti-competitive and anti-consumer concentrations of power within the financial services sector, which would have ultimately increased costs for homebuyers," according to an NAR resource page it has devoted to the issue."

I can't believe they've been fighting this for EIGHT years. All it took was the banking system completely screwing up our entire economy for Congress to realize that the major banks need to keep their focus on banking. Can you imagine if instead of real estate agents to help you buy or sell your home, all you got were employees of JP Morgan Chase and Bank Of America? Yikes! Score one for the Obama administration.

$8000 tax credit - more details

Now that all the details are out on the new home buyer tax credit, here are some more features not in my first post earlier:

-It's NOT JUST FOR 1ST TIME BUYERS. You an also take it if you have not owned a home just in the previous 3 years.
-It is indeed capped at 10% of the purchase price if the purchase price is below $80,000.
-If you make over the income limits, a partial benefit is available if you make between $75,000 and $95,000 (individual) or $150,000 and $170,000 (couple).
-This is only for owner-occupied primary residence homes. You can only have one primary residence at a time.
-If you use a bond money mortgage, you still qualify!
-You can't buy the home from a close relative.
-You can take the credit in either 2008 or 2009.

Here's a great summary sheet:
http://www2.cabr.org/files/HomebuyerTaxCredit.pdf

Obama's foreclosure-prevention plan

This morning, President Obama unveils his plan pledging $275 billion to help stop foreclosures. To my understanding, it subsidizes lenders to restructure mortgages that are in trouble to the point at which the payments are brought down to 31% of the borrower's income. Banks that have taken TARP government bailout money will be forced to do this program, and that's a lot of the banks.

Critics of this plan keep pointing out that of all the mortgages that have been restructured so far, 50% of them are in redefault. They say this as a way to show that it doesn't work. But they're completely missing the point. That means that half of the time, IT DID WORK! They're making their payments. It saved an American family from going through the pain of foreclosure, it saved the lender a bunch of money by not having to foreclose, and if this plan continues to work just half of the time, it will prevent literally millions of foreclosures that continue to bring property values down for all of us.

Now I know this stinks for the rest of us responsible taxpaying, mortgage-paying Americans. Our tax money is going to be used to bail out some really ridiculous decisions made by borrowers, who will have effectively refinanced their homes that they could barely afford in the first place, outfitted their homes with swimming pools, big screen TVs, and god knows what else, and then bail them out. But unfortunately, it beats the alternative of doing nothing.

It would have been really nice if this plan had included something for people who have never missed a mortgage payment, some treat. But it does not. We just have to deal with the fact that the only benefit we will get from all of this is that by mitigating foreclosures, our property values will benefit, or not suffer as much.

Remember, 50% back in default means 50% worked. Maybe this will all be over in 50% of the time it would have otherwise taken!

New First Time Buyer $8000 tax credit details

Don't have all the details yet, but here's what we know so far about the new tax credit for first time homebuyers.

-$8000 (up from last year's $7500 credit), and unlike last year's, this one does not need to be paid back!
-For purchases between January 1st and December 1st, 2009.
-Income limits are $75,000 for individual and $150,000 for couple.
-First time buyers only
-Principal residences only
-No disqualification for using Bond Money.
-If you sell the home in the first 3 years, you must repay it.

*I'm assuming the credit is capped at 10% of the property sale price or $8000, whichever is smaller, like last year's credit (so you can't buy a $10,000 property and get an $8000 tax credit).

More details to come, plus a piece on what I think this will do to the market.

Surprise! Home sales are up.

Today the National Association of Realtors reported that December existing-home sales were up 6.5% from November. What?? You mean, if interest rates come way down and prices come down, people will buy homes? Yup. Just wait until January's stats come out. We Realtors have been busy as heck this month! The news media will be all over it, calling the "housing bottom" (again).

If you are one of the many homebuyers on the proverbial fence, do not fear. The train has not left the station without you. Countering the positives I mentioned above is rising unemployment and falling personal net worth. So we just may move sideways for a bit longer, giving you ample opportunity to "get in." Hopefully, the incoming Obama administration will notice that incentives make people interested in buying homes and give a tax credit to anyone who buys an existing home (in addition to the $7500 credit available currently for first time buyers). Notice I exclude new construction homes from this idea, because that last thing we need is more of that right now. We can hope, right?

Those who have spoken to me recently know I think calling housing bottoms is a pointless activity. But we do need to be prepared for the bounce that will come. That will be the topic of my next posting.

Stay warm.

More incentives on lender owned homes

With the glut of foreclosed homes for sale out there, lenders continue to provide incentives to owner-occupant buyers who want to take advantage. Freddie Mac is now offering 3.5% of the purchase price toward an owner-occupant buyer's closing costs. This is equivalent to NO CLOSING COSTS in most cases. If you or someone you know fits this description and want to jump on this opportunity, give me a call. I can help you find which homes qualify and walk you through the process.

Stop whining and let our government try to save us from disaster

Bailout, rescue plan, whatever you want to call it. Congress is getting ready to vote on this $700 Billion plan to try and save the financial world from collapsing. And out comes everyone (including Michael Moore) to whine about it. No! Don't bail out the rich executives who got us into this mess!

Well guess what? We have no choice. Yes, it stinks that the American taxpayer will be footing the bill (at least until the $700B is recouped). Yes, it stinks that the Bush administration created this mess and now is saying fund this or else. But we have no choice.

Why not? What will happen if we don't take action?

Let's recoup recent events. AIG, our biggest insurer - toast. Washington Mutual, 6th largest bank in USA - gone. Wachovia - done. Bear Stearns and Lehman Brothers - history. Fannie and Freddie? National City...headed down. Stock market - down 20% or so on the year. Crisis catching on in other countries now. Do we really want to just let this play out and see what happens? Don't these people have retirement accounts that they'd like to not see destroyed? Do you really think a world in which we only have a handful of banks to choose from would be good for competitive capitalism?

Stop whining. Pass the bill. What's another $700 Billion when we're already $10 trillion in debt. I'd rather not have the honor of living through Great Depression II.

I'd take Bond Money over the new Tax Credit any day

I'd take Bond Money over the new Tax Credit any day...

What? Let me explain and bring you up to speed.

Our government passed a new tax incentive for first time homebuyers as part of their new housing bill. Awesome! One of the first things they've done right to help the housing market correct! It's an odd tax rebate though. It's essentially a $7500 interest-free loan from the IRS that you pay back over 15 years. That's great if you want to improve the house you just bought. Great also if you just stick it in a money market account and let it earn interest while you pay it back. And not hard to pay back if you're the type that usually gets a tax refund every year.

One of the catches is you're not eligible if you finance your home with Bond programs such as the Ohio Bond Money program that's very popular right now. Folks who just completed their first purchase with this program may be bummed at first to find out they don't qualify for the tax "rebate." But actually, they are making out far better.

You see, as I understand it, Bond Money programs are a government initiative to encourage first time homebuyers (not too unlike this new rebate). But the key is, at the time I write this the interest rate on a Bond Money loan is a half of a percent lower than a regular FHA loan (which WOULD qualify for the rebate).

I would take a fixed interest rate that's 0.5% lower over a $7500 interest-free loan ANY DAY OF THE WEEK. This lowers your payments by hundreds if not thousands per year, depending on your loan amount. That's money in your pocket every year you own the home, and you don't have to repay it!

Here's a summary of the new tax rebate for first time homebuyers:
http://www2.cabr.org/files/homebuyer-tax-credit-Q&A7-29-08.pdf

Perhaps some loan officers from the blogger community will weigh in on whether I've nailed this or not...

All this said, there are income limits to the Ohio Bond Money program. So if you don't qualify for it and you are going to buy your first home, the tax rebate may be quite beneficial to you. I mean, where else can you borrow $7500 interest free?

The rebate program goes through October 2009. So guess what...it's time to buy!

Contact me if you have any questions, want to take advantage of historically low interest rates, or are ready to borrow the government's money interst-free!

Will high gas prices kill the suburbs?

I have gotten a lot of questions recently, as people discuss the Unites States' current gas price situation, as to whether or not this has had an effect on real estate.

The short answer is no.

Cincinnati is like most other metropolitan areas in that people in the last 10 to 20 years have been more and more willing to live farther from work in order to have bigger, newer homes. This accounts for the boom in places like Liberty Township and Maineville, and Goshen, where you can get a great size new house for a great price, but you may have to commute 45 minutes to work.

With gasoline just above $4 per gallon, I haven't seen any effects yet. But we know people are thinking about it. No doubt people who recently bought homes are wondering if they made the right choice in location. Although being a Realtor means driving around all day every day, which is no fun with high gas prices, I still find myself happy about where I chose to buy, since I'm close to 2 highways. I finally saw a piece in a major publication about all this with this piece in Newsweek: "Driving Down Real Estate."

I believe high oil/gas prices are here to stay. In fact, the head of OPEC just said so (it's of course due to demand from China and India), and I'm sure he knows a lot better than I. So as they continue to rise, to $5/gallon or $6/gallon or $7/gallon, will we get to the point that people start making their housing decisions based on the price of gas? It will be interesting to watch.

2nd Annual Harass Me At Homearama event!

Homearama is about to begin, and this year you'll have another opportunity to come harass me in person on:

Friday June 20th from 4 to 7:30 PM

I'll be stationed at the Chateau Tourelle, selling for a cool $2.45 million.

Homearama runs June 7th through 22nd in Long Cove in Mason. It's always a blast, and this year's collection of homes looks great again. For more info, visit www.homearama.cc.

By the way, if you'd like to purchase the Chateau Tourelle, you don't need to wait until June 20th from 4 to 7:30. I'd be happy to meet with you ASAP!

Another homebuilder leaves Cincinnati

According to the Cincinnati Enquirer, national homebuilder Ryland Homes is leaving the Greater Cincinnati market. It will finish up its neighborhoods currently under construction first, and will continue to honor its warranties to customers.

This comes on the heels of another national homebuilder Beazer Homes leaving town recently.

If you're thinking that these companies leaving Cincinnati is a bad sign for the market, you are wrong. In fact, it's a good thing. One of the major factors in the recent real estate price downturn has been way too many homes on the market, and the builders are the biggest culprit of this. The departure of Beazer and Ryland means less homes will be built here, and that is exactly one of the things that needs to happen in order for home prices to stabilize and head back up. (Beazer and Ryland have built many fine homes here, so nothing against them in particular).

In fact, the homebuilders' role in the housing market downturn has come under more scrutiny lately, as Congress is poised to give $5 Billion in tax breaks to national homebuilders. It's nice, of course, that Congress wants to help an industry that is hurting. However, it is the big homebuilders (KB, Toll Brothers, Hovnanian, etc.) who just continued to build and build despite all the warning signs of market over-saturation. People are concerned that giving them $5 Billion is going to encourage them to just build more homes, which is not what is needed right now. In fact, maybe we should be paying them to NOT build more homes!

Share your thoughts on this matter with me at jmandel[at]sibcycline.com, or respond on this post.

Who wins in this real estate market?

Everyone is always asking me, how bad is the real estate market? Is it getting any better? With all the focus on the negative, I began thinking, maybe we should be focusing on who is doing WELL in this market. With stocks, Jim Cramer says, "There's always a bull market somewhere." Well, within the real estate market, there has to be someone who is doing well, right? Without further ado, here are the 3 groups of people WINNING in the current market conditions:

1. FIRST TIME BUYERS. This may seem obvious, but let me clarify. I mean first time buyers who are actually pulling the trigger. Yes, it's scary to buy your first home right now, with the media acting like it's real estate doomsday, but the folks doing this right now are going to see immense benefits down the road. On one hand, you have tons of homes to choose from and desperate sellers, making it easy to get a great deal. You still have tons of foreclosed homes out there as well, so if you're handy you can get an even better deal (HUD is offering $2500 to any owner occupant who buys a HUD home!). But perhaps the best condition for first time buyers right now is the interest rates - they're at historic lows. With the Ohio Bond Money program, a first time buyer with decent credit can get 100% financing and the rate has been hovering between 5.35% and 5.75%. 30 year fixed rate. That's not a typo! I believe 5 years from now, when rates are a couple points higher, these buyers will be the envy of everyone they know due to this mortgage rate alone, not to mention the fact that they bought in during what experts are calling the "opportunity of the decade."

Now, still on the winning end, but not nearly as much, are the first time buyers who are still on the fence and have not bought yet. Many of these people are trying to "time the market bottom." This makes sense in theory, but I believe it's IMPOSSIBLE TO TIME THE MARKET BOTTOM. There will be no magic sign that indicates the real estate market is going upward again. At least, not until a couple straight months of sales numbers come out (2 months after the fact) and show increases. And by that time, you're TOO LATE. You've missed the bottom and you're buying into the upswing again. These buyers also risk the mortgage rates going up while they wait. Especially in Cincinnati, where many areas have remained flat but haven't actually fallen in price, all you can do is buy while the market is generally down. Just like stocks again: buy low, sell high. Right now is the time to buy low.

February 2008 had 1,787 new pending home sales in Cincinnati, compared to 1,791 in February 2007. A whopping difference of.....4. Does that sound like sales are plummeting to anyone? Not exactly.

2. PEOPLE MOVING UP IN PRICE are the 2nd group of winners in this market. This means you're selling one home and buying a new one that is more expensive. The selling part may be painful right now, but overall you will be winning. Let me give an overly simplified example to illustrate:

Suppose if you bought a new home right now you would be getting a 10% discount, but to sell your current home, you have to sell it at a 10% discount (remember, this is very over-simplified, but bear with me). You're selling your $200,000 home and moving up to a $350,000 home. On the selling end, you lose $20,000. Ouch. But on the buying end, you gain $35,000. Opposite of ouch!

This example does clarify the big losers in this market: people who are moving down in price, and people who are selling a home but are not buying another.

3. INVESTORS WITH A LONG TERM HORIZON. By long term, all I mean is a minimum of 2 or 3 years. Basically, not the flippers, but those who hold property and rent it out. They are winning right now due to the ridiculous number of foreclosed homes out there to buy, which are their favorite kinds to buy because they don't mind doing some work on them, and they can get them for a great deal. The biggest problem that caused all these foreclosures (irresponsible/unregulated subprime lending) has been curtailed, and now it's just a matter of waiting for the rest of the foreclosures and will-be-foreclosures to work their way through the system. Within a few years, this glut of homes will hopefully be done with, and we'll be back to how it was in 2005, where there was so much competition over these kinds of homes that the professionals had to start going out to distant counties just to find good deals. At that point, the smart investors will be happy that they bought some homes now while the deals are great and rented them out since (the rental market is FINE, by the way). Good money will be made by investors this way. All they need, as Guns n' Roses once said, is "just a little patience."

So there you have it, the winners in this real estate market. Feel free to email me at jmandel[at]sibcycline.com with your thoughts!

Hamilton County property tax re-assessment deadline

March 31st is the deadline for a request for re-assessment in Hamilton County. What this means is if your property is assessed for real estate taxes at an amount that is more than it would currently sell for, you can ask the county to lower it, and you would thus be paying less in taxes. You need comparable sales to justify your request.

If you are unsure what your property is assessed at, look yourself up at www.hcauditor.org/realestate.

If you need help with generating a list of comparable sales, just let me know!

Big Incentives on HUD homes in Ohio

The Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) recently announced a nice incentive for owner occupants wishing to purchase a HUD home. A "HUD home" is one that was foreclosed on and is now in the hands of HUD, who needs to sell it.

$100 down payments on FHA loans on these properties.

$2500 Allowance for closing costs, repairs, or mortgage buydown if you get an FHA loan. $1000 if you use other financing.

Real Estate Broker bonus of $250 to $500 for every HUD home sold. Hooray for us :)

Benefits of FHA financing:
-Flexible underwriting
-No minimum credit score
-Competitive interest rates
-Government insured
-This incentive can be used in conjunction with the Ohio Bond Money program!

Again, this must be for an owner-occupant. There are over 400 of these available in the Cincinnati area right now.

If you or someone you know has been thinking of purchasing a foreclosed or lender owned home, this would be a great time to kick it into gear. You'll need a buyer's agent who knows how to deal with these kinds of properties and get you the best deal possible. So call me!

Negotiation Nightmares on Lender Owned Properties

Here's a good article, written for Realtors, but that the whole real estate world should find interesting. It's regarding the never-ending fun that is negotiating a deal on an REO (or lender owned) property.

READ ARTICLE

It covers subjects such as why they take so long to respond, and reminds us that it's not a deal until we have the contract signed by them in hand, among other things. These negotiations can sometimes be frustrating, but they can often mean getting a nice deal on a piece of property.

Flippers Fuel Foreclosures

This article from CNN Money points out a different angle of the nation's current situation with record levels of foreclosures. In some of the states hit hardest, as much as 1/4 or 1/3 of the foreclosures and mortgage delinquencies are from non-owner-occupants (i.e. investors).

When reading about foreclosures on the rise, we usually picture regular people losing the family home. However, a lot of these foreclosures may be flippers who took a gamble, lost big time when the market cooled, and simply walked away.

Just in my own neighborhood of Loveland/Miami Township, I've watched several situations over the past couple years where a flipper fixed up a home, only to have it languish on the market for a long time, not selling.

READ THE STORY

Property tax relief for seniors and disabled

The state of Ohio has expanded its Homestead Exemption to include all seniors and qualified disabled individuals, regardless of income. These homeowners will be able to shield up to $25,000 of their property value from property tax.

To qualify, an Ohio homeowner must be:
-at least 65 years or older, or will reach age 65 during the current tax year
OR
-certified totally and permanently disabled as of Jan 1st of the current tax year, regardless of age
OR
-the surviving spouse of a qualified homeowner and at least 59 years old on the date of the spouse's death.

In order to take advantage of this, you must apply with your local county auditor by October 1st, 2007!

For more info, click HERE.

Thanks to Cindy Daumeyer for suggesting this post.

Pending home sales down in Midwest

According to this article from National Association of Realtors:

Pending home sales, an indicator of the strength of the housing market, are down 3.5% nationally and 8.9% in the Midwest from this time last year.

Sure, the subprime lending fiasco has impacted this. But another thing I keep seeing in print as a reason is "buyer confidence."

In fact, with all the news articles out there every day about the housing market, you don't see very many that are positive in any way, unless they come straight from NAR. This begs the question, would consumer confidence be this down if the media wasn't constantly telling us that it was? In a weird way, is the media's bleak outlook on housing actually causing some people to be hesitant to buy, and thus a cause itself of our slow market?

Something to think about...

Top 10 Myths about Real Estate Agents

Here's a pretty awesome article I stumbled upon about the top misconceptions people have about real estate agents.

READ ARTICLE

Myth #2 is a good one. I've only ever had one buyer client put it together and ask, "What's your motivation to get me the lowest price, if you're paid a percentage of the sale price?" Weintraub is correct that the commission difference doesn't come out to that much. But more importantly, a good agent will gladly give up $150 not only because it's our duty to our client, but because it means that you're going to tell everyone you know about the great job your agent did helping you buy your house! That can mean thousands of dollars in future business for us, so in an odd way, this system works.

Ohio Senator seeks to delay septic system rules

From Ohio Associaton of Realtors:

"Last week, Ohio’s REALTOR community provided overwhelming response to a lawmaker’s request for reports of property sales negatively impacted by the state’s new septic system regulations. As a result, Sen. Timothy Grendell, who represents Lake and Geauga counties, has sent a letter to Senate President Bill Harris seeking passage of legislation that will provide for a delay in implementing the new rules until January 2008 in an effort to “find a better, more functional, and economically appropriate way to deal with this issue.”

There’s still time to notify Sen. Grendell of instances where the rules have prevented real estate transactions from being consummated because of the costs involved with compliance. He has invited members to e-mail details to him at his office address, which is SD18@mailr.sen.state.oh.us.

Members who send e-mails to Senator Grendell are urged to send a copy to OAR’s Chief Lobbyist, Bob Fletcher. Bob’s e-mail address is fletcher@ohiorealtors.org.

The response by REALTORS has given Sen. Grendell real life examples of how the new septic system regulations are disrupting the marketplace and creating unreasonable hardships for property owners who are required to comply with them. Additional comments will strengthen his case for passage of Senate Bill 83, which will impose a moratorium on the new septic rules."