The Road To Recovery

This is a wonderful Power Point presentation given to over 30,000 participants at the National Association of Realtors, Annual Conference in New Orleans in November 2006. It cannot be posted here, but please send me your e-mail address and I will send it out to you right away. Call me at 386-453-7909 or e-mail your request to nadinecaldwell@onebox.com.

Housing Slump May Be Nearing End

NEW ORLEANS – Nov. 13, 2006 – Saying “the worst may be over,” the housing industry’s chief economist said Friday that home prices must continue to come down in some regions before the real estate slump plays out.

“We need a price decline, we were over bloated,” particularly on the West Coast, David Lereah, chief economist for the National Association of Realtors, told attendees at his organization’s annual meeting here on Friday.

“In 2007, it will be a flat year, maybe 1 percent (sales) drop, and that’s it,” he said. “After 2007, we’ll be back to expansion again,” Lereah said.

But Steve Murray, a Littleton, Colo., industry consultant who followed Lereah on the podium at the convention, which drew an estimated 30,000 people, said he was less optimistic about the speed of the market’s recovery.

“Lereah said we’re at the bottom (of the slump), but in most markets we are going to slide some more,” Murray said. Citing interviews with executives at more than 100 large real estate firms, he said the pending sales data could be falsely reassuring.

“The fall-through rate (of contracted home sales) has gone from single to double digits,” Murray said the executives reported. “Buyers can’t sell their existing homes.”

“People who think this thing is going to turn around in six months are out of their minds,” Murray said in an interview before his speech.

Lereah forecast that 2006 sales will end up about 9 percent lower than in 2005, a record year. He anticipates sales of 6.47 million units, declining to 6.43 million next year. Prices nationwide will be down by about 2 percent, year over year, and will inch up by 1.5 percent in 2007, he said.

New-home sales will decline this year by 16.8 percent, to 1.07 million units, and will sink 8.7 percent further next year, to 975,000, he said.

Lereah said inventory is stabilizing, citing his trade group’s data on pending sales - homes that have gone under contract.

“It appears that inventory has peaked,” said Lereah, who now estimates a 7.3-month supply of available homes nationwide.

“We were hovering near 4 to 5 months’ (supply of homes fore sale) during the boom, and in some areas, such as Orange County, Calif., we were measuring it in weeks, not months.”

But Lereah said the national picture is positive. “I’m optimistic for 74 percent of the country,” where local markets are, at worst, flat. “The other 26 percent are in for some rough times.”

Struggling the most would be California, Southern Florida, Arizona, Nevada, and metro Washington, D.C., he said, where sellers particularly need to lower their prices.

© 2006, Chicago Tribune, Mary Umberger. Distributed by McClatchy-Tribune News Service.

To Rent or Buy - Which is Right for You?

Should you sign another lease or take the plunge and buy a place of your own? Millions of Americans ask themselves that question everyday. To make a wise decision consumers should consider a few factors, such as their lifestyle and financial situation. There is no right or wrong answer when trying to make a decision to rent or buy. A good decision is one that is right for you. However, there are advantages and disadvantages to both.
Although most Americans own their homes, homeownership is not for everyone. If you move around frequently, have credit problems or if you cannot afford the home you want or simply do not want the responsibility of owning a home, you could be better off renting. Usually when renting, the landlord or owner of the property generally pays for the cost of any work or repairs that are done to the property. And, there is generally less up-front cash needed to move in.
However, when you are renting a property, you are waving good-bye to your money each month. Renting a home does not provide tax advantages to the renter. Any and all tax advantages go to the landlord or property owner. Also, monthly payments for renters can be unpredictable, depending on the lease.
Owning a home is a big responsibility. Not only does it mean paying a mortgage each month, but it also involves other costs associated with the home, such as, the cost of insurance, taxes, repairs and general maintenance. First-time homebuyers are often startled by the investment associated with purchasing a house. The down payment required can be as much as 20 percent. You also have to consider other fees, such as lawyer's fees, points, escrow costs, appraisals, and credit checks.
In spite of the risks and responsibilities, millions of people enjoy the rewards of home ownership. Purchasing a home is generally a sound investment. As you pay down your home loan, you are building equity. And unlike many things you buy, a home can actually increase in value over time.
Home ownership does offer tax advantages. The mortgage interest and real estate taxes are tax deductible, which allows you to subtract part of your housing-related expenses from your income, thereby reducing your tax liability.
There is not much doubt that for most people owning a home is better over the long term than renting. When you have made the decision to buy, do your homework. Know how large a mortgage you can afford. If possible, get "pre-qualified" for a loan. When you find a home you like, carefully give it your own personal inspection. If you have questions, seek the advice of a professional. And, contact the Better Business Bureau for a reliability report on the mortgage company that you decide to do business with. 4/18/2003
© 2003 Council of Better Business Bureaus, Inc.

Four tips for buying a house in a buyer's market

NORTH PALM BEACH, Fla. -- Oct. 6, 2006 -- Now is a great time to buy a house. Prices are falling, and so are mortgage rates. Millions of houses are for sale, and sellers are getting anxious.

That's one way of looking at it.

Alternatively, you could say: This is a bad time to buy a house. Prices might be lower in a few months. Same with mortgage rates. With more than 4 million houses on the market nationally, and more being added daily, sellers are bound to become desperate. Why not wait them out?

In many places, it's a buyer's market in real estate, with sellers outnumbering potential purchasers. The resulting downward push on prices makes buyers happy. But it complicates matters for buyers, too. In some markets, there are too many choices to sort through. Even more bewildering, buyers wonder if they should wait a few months.

"They're worried that they're going to buy too soon, and the figures will reduce, and by the time they go through the transaction, they'll have negative equity," says Mario Villena, vice president of Homekeys, a Miami-based online real estate brokerage. But, Villena adds, in every market there are people who are serious about buying, and don't get sidetracked by market forces that aren't under their control.

For those buyers, experts have some advice: If you find the right house at the right price, buy it.

1. Put technology and a buyer's agent to good use.

2. Negotiate effectively.

3. Avoid gimmicks.

4. If you find the right house at the right price, buy it

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1. Put technology and your agent to good use

Cool technological innovations are popping up on real estate Web sites practically every week. Among the most useful are valuation tools. Zillow has the best known of these called the "Zestimate," which is a computer-generated estimate of a house's market value.

The Homekeys site allows users to find estimated market values and to search for listings with aggressively competitive asking prices. Homekeys operates only in Florida, whereas Zillow has nationwide coverage.

It's hard to stress how revolutionary these valuation tools are, Villena says: "Until recently, this was impossible. You didn't have, as a consumer, tools that could reasonably provide home values to you without spending something like $300 for each property to appraise it."

Now those estimates are free, and you can get them without changing out of your pajamas.

Villena recommends that buyers start out by playing around with Web sites such as Homekeys, Zillow and Realtor.com, just to find out how much they can learn about the houses in their target neighborhoods. Focus on finding faster ways to weed out the houses you're not interested in -- because they don't fit your criteria for asking price, size, neighborhood or amenities.

"If you're a serious buyer, you really have to increase the speed at which you arrive at reasonably priced homes," Villena says. "Those are the ones that are going to see a lot of action. You need to be early to that party. Start out by being more specific about the characteristics defining your desired home."

With so many houses on the market, it's useful to hire a buyer's agent to sort them out, says Pam O'Connor, president of Leading Real Estate Companies of the World, a national network of 650 regional and independent brokers. You have your pick of agents now, and "you should be asking what's their experience, how long they've been in the market, what price they specialize in," O'Connor says.

If you find a house you like, ask the agent to perform a comparative market analysis -- basically, to do what technology does, but with the addition of human judgment. Do your own analysis online. Compare your research with your agent's. If they corroborate each other, fine. If something seems amiss, find out why. (An experienced agent is almost surely more accurate than Zillow.)

2. Negotiate effectively

Right now, "there's more room for negotiation" in most housing markets because the sales pace slows in autumn, and prices have been falling, says Steve Habetz, president of ARCServ, a network of real estate attorneys.

Villena counsels buyers to avoid the temptation to toss out lowball offers, because sellers won't negotiate if they feel insulted. "You have to be able to defend that offer as much as the seller has to be able to defend the asking price," he says. "If you're not making a full-price offer, it's not enough to pull a number out of the air. You should be able to show that this neighborhood has 20 comparable homes for sale, and, although I like your property, it's priced 6 percent above the other properties. That gives you a better footing for establishing an objective and reasonable negotiation."

Don't just negotiate with the seller. "Most people think that only sellers pay commissions," Villena says. "They think that buyers are being serviced for free. Most people are not yet aware that there is a commission component reserved for the buyer's agent. And that, too, just like the seller's commission, is negotiable."



3. Avoid gimmicks

You're shopping for a house, not for a Caribbean cruise or a car lease. Recently The New York Verdana, Arial reported on a condo seller who was offering to give the buyer a year's use of a leased Mercedes-Benz E-Class sedan. Razzi says you'll find all sorts of gimmicky incentives from condo sellers. They offer flat-screen TVs or weekends at vacation homes, or more creative inducements. "That has nothing to do with the transaction at hand," Razzi says. If there's an incentive, make sure it has something to do with the dwelling -- upgraded countertops, decorating allowances, payment of mortgage closing costs, that sort of thing. "If they're willing to subsidize it with a $500 TV, ask for $500 off the asking price," she says.

There's another gimmick to avoid: what O'Connor calls "magic loans." This is the time to avoid mortgages such as pay-option ARMs and interest-only loans, she says. If you can't afford it with a more mainstream loan, such as a 30-year fixed or a 5/1 ARM, you can't afford it. Not in this market, where house values could drop and mortgage rates are almost sure to rise.


4. If you find the right house at the right price, buy it

If you're serious about buying a house, this is both the first step and the final goal. To put it more precisely, you have to decide whether you will actively shop and then negotiate a fair deal, or if you'll just passively browse houses, hoping to stumble on a steal.

You're more likely to succeed with the active approach instead of waiting (possibly in vain) for prices to fall further. You can't predict when the local market will hit bottom. Even if prices do fall, someone could buy your favorite house out from under you. Diane Saatchi, a real estate agent with the Corcoran Group on Long Island, N.Y., draws this analogy: "It's like when you find a dress that you like, and you wait for it to be on sale, and then the sale comes and they don't have your size. Theoretically, you saved 20 percent. But you don't have your dress."

There's always the possibility that you'll buy a house and then the value will fall. In the 1990s, Southern California and South Florida had housing slumps in which it took years for prices to recover their previous levels. It could happen again, there or elsewhere. For that reason, "buy a home that can grow with you if necessary," says Elizabeth Razzi, author of "The Fearless Home Buyer."

"Look to the long term, because you don't know how long you'll be there," Razzi says. "You might have to ride out bad market conditions for a while." True to her book's title, Razzi says you shouldn't let fear dictate your timing.

"You should not wait if you find the right property, because, for one thing, you're not looking solely for the best price. You're looking for the best home."

And keep in mind that mortgage rates have fallen about three-quarters of a percentage point in the last three months. "Right now is a perfect time to buy, because of a real sudden increase in buying power," says Bill Christiano, loan officer with MortgageIT's office in suburban Westchester, N.Y.

© 2006 Bankrate.com