Live on the Red Line - Real Estate

Financial Benefits of Home Ownership

There are a number of personal and emotional reasons to buy a home. But there are also some strong financial reasons to make the investment. In addition to exceptional home affordability and near historic interest rates, here are some important financial benefits of owning a home:

Increased Net Worth: Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.

A Big Tax Deduction: One of the largest tax deductions available is the amount of interest paid on a mortgage. In fact, a $150,000 home at a 5.50% interest rate can add up to approximately $8,000 in first year's interest. This amounts to a significant savings - effectively reducing the amount of a homeowner's monthly loan payment.

Long-Term Appreciation: Over the last few years, home prices have corrected and become more affordable. While that's good news for potential buyers, it has overshadowed the long-term appreciation of a home's value. The reality is, despite market ups and downs, real estate historically appreciates around 6% per year. Even if you calculate a modest appreciation of 3%, a home purchased today for $150,000 should grow in value to $364,000 over 30 years.

$8,000 Tax Credit: Don't forget, the government is offering an $8,000 tax credit for first-time homebuyers - or for folks that haven't owned a home during the past three years. However, the program is scheduled to end soon. In fact, the Internal Revenue Service recently reminded potential buyers that they must complete their first-time home purchases before December 1, 2009 to qualify for the special credit, which means the last day to close on a home and qualify for the credit is November 30, 2009.

If you're considering purchasing or selling a home, this is an ideal time. Call or email me today to discuss your specific situation and how you can benefit from today's market.

Washington DC vs. Federal Tax Credits

This article has a great graph on the differences between the two:

http://dcmud.blogspot.com/2009/08/dc-v-federal-tax-credits.html

FHA Program Offers Purchase, Renovation Aid

The Federal Housing Administration is encouraging use of its little-known 203(k) loan program.

The 203(k) lets an owner-occupant borrow money for both the purchase and renovation in one loan, and put down only 3.5 percent.

The program requires the use of credentialed contractors and can include cosmetic improvements as well as major renovations like replacing plumbing or electrical. Completing the application process requires patience, says Nancy Hammock, an associate with RE/MAX Properties in Western Springs, Ill.

But in this lending environment, more homebuyers are finding 203(k)s worth the hassle. In fiscal 2008, the government insured about 6,700 of the 203(k) loans. This year, more than 11,000 loans have already been insured, according to the Office of the Comptroller of the Currency.

Source: Chicago Tribune, Mary Ellen Podmolik (08/14/2009)

Buying a Home: Buyers Rush to Beat Tax Credit Deadline

Real estate professionals report that first-time home buyers are flooding the sale market, pressed to finalize a deal before the federal government's $8,000 tax credit offer expires on Nov. 30.

Because mortgage approvals, residential inspections, and other steps in the buying process typically take about two months, buyers hoping to take advantage of the incentive will need to have a contract by the end of September.

The new flurry of activity now as house-hunters try to meet the deadline is triggering bidding wars and energizing the property market, which historically is slow at the end of summer. As a result, more homes are getting their full asking price.

Source: Chicago Tribune, Kathleen Lynn (08/14/09)

Real Estate: Strong Gain in Existing-Home Sales

For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of REALTORS®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million units in July from a level of 4.89 million in June. Sales are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.

Largest Gain in a Decade

Lawrence Yun, NAR chief economist, said he is encouraged. “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said.

The monthly sales gain was the largest on record for the total existing-home sales series dating back to 1999.

“Because price-to-income ratios have fallen below historical trends, there are more all-cash offers. In some recovering markets like San Diego, Las Vegas, Phoenix, and Orlando, the demand for foreclosed and lower-priced homes has spiked, and a lack of inventory is becoming a common complaint,” Yun said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.22 percent in July from 5.42 percent in June. The rate was 6.43 percent in July 2008.

"First-Time Buyer Tax Credit is Working"

An NAR practitioner survey showed first-time buyers purchased 30 percent of homes in July, and that distressed homes accounted for 31 percent of transactions. NAR President Charles McMillan said the first-time buyer tax credit is working. “In addition to first-time buyers, we’re also seeing increased activity by repeat buyers. While many entry-level buyers are focused on the discounted prices of distressed homes, they’re also freeing some existing owners to sell and make a move,” he said.

“Realtors are the best resource for consumers in these changing market conditions because the transaction process has become more complex. Since it’s now taking longer to complete a home sale, first-time buyers who want to take advantage of the $8,000 tax credit should try to make contract offers by the end of September,” McMillan said. “Otherwise, they may miss the November 30 closing deadline.”

Inventory Up, Prices Down

Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, which was unchanged from June because of the strong sales gain. Raw inventory totals are 10.6 percent lower than a year ago when the number of unsold homes was at a record.

The national median existing-home price for all housing types was $178,400 in July, which is 15.1 percent lower than July 2008. Distressed properties continue to weigh down the median price because they typically sell for 15 to 20 percent less than traditional homes.

Single-Family Homes and Condos

Single-family home sales increased 6.5 percent to a seasonally adjusted annual rate of 4.61 million in July from a pace of 4.33 million in June, and are 5.0 percent higher than the 4.39 million-unit level in July 2008. The median existing single-family home price was $178,300 in July, which is 14.6 percent below a year ago.

Existing condominium and co-op sales jumped 12.5 percent to a seasonally adjusted annual rate of 630,000 units in July from 560,000 in June, and are 5.9 percent above the 595,000-unit level a year ago. The median existing condo price was $178,800 in July, down 18.9 percent from July 2008.

By Region:

• The Northeast surged 13.4 percent to an annual pace of 930,000 in July, and are 3.3 percent higher than July 2008. The median price in the Northeast was $236,700, down 15.0 percent from a year ago.
• Existing-home sales in the Midwest jumped 10.9 percent in July to a level of 1.22 million and are 8.0 percent above a year ago. The median price in the Midwest was $157,200, which is 5.9 percent less than July 2008.
• In the South, existing-home sales rose 7.1 percent to an annual pace of 1.95 million in July and are 5.4 percent higher than July 2008. The median price in the South was $164,500, down 7.1 percent from a year ago.
• Existing-home sales in the West slipped 1.7 percent to an annual rate of 1.13 million in July, but are 1.8 percent above a year ago. The median price in the West was $202,300, which is 28.0 percent below July 2008.

Source: NAR

REMINDER: Home Buyer Tax Credit Expires December 1,2009

If you are going to take advantage of this tax credit, you will need to close on your purchase by 12/1/2009.  Please remember that finding a home, getting the contract ratified, and obtaining loan approval will take about 45-60 days.  In order to meet the deadline, you should start looking before the end of September.

For more info:  http://www.federalhousingtaxcredit.com/2009/index.html

Washington DC - Arlington - Alexandria in the Top 10 for cities to "recover economically" early

Some cities are likely to recover more quickly from the housing downturn than others. Forbes magazine has identified the top 10 cities that it believes are poised for recovery by examining unemployment figures, projected gross domestic product from Moody’s Economy.com, and housing affordability data from the National Association of Home Builders.

Overall, cities most likely to recover first are those with strong technology capabilities.

Here is Forbes’ top 10:

1. Austin-Roundrock, Texas
2. Fayetteville-Springdale-Rogers, Ark.
3. Boulder, Colo.
4. Huntsville, Ala.
5. San Antonio, Texas
6. Mobile, Ala.
7. Dallas-Fort Worth-Arlington, Texas
8. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
9. McAllen-Edinburg-Mission, Texas
10. Seattle-Tacoma-Bellevue, Wash.

Source: Forbes, Joshua Zumbrun (6/10/09)

Live on the Red Line Metro - Real Estate
Washington DC Real Estate Blog - including all neighborhood real estate stops on the Red Line Metro Rail...

Washington DC - Arlington- Alexandria rated in top 10 to "start fresh"

Some parts of the United States have been less affected than others by the economic downturn.

"If people are looking for a job and they're in Detroit, they're in the wrong place. They need to be considering geographic mobility," says Ernie Goss, professor of economics at Creighton University in Omaha.

BusinessWeek magazine, with help from staffing firm Manpower, has examined job opportunities all across the country, ranking metropolitan areas based on the percentage of companies planning to hire in the third quarter.

Here are the top 10 places it identified as offering the best opportunities for anyone looking for a fresh start:

1. Anchorage, Alaska
2. Provo-Orem, Utah
3. Kennewick-Richland-Pasco, Wash.
4. Yakima, Wash.
5. Omaha, Neb.-Council Bluffs, Iowa
6. Richmond, Va.
7. Winston-Salem, N.C.
8. Colorado Springs
9. Amarillo, Texas
10. Washington, D.C., Arlington-Alexandria, Va., plus areas in Maryland and West Virginia

Source: BusinessWeek, Prashant Gopal (06/09/2009)

Live on the Red Line Metro - Real Estate
Washington DC Real Estate Blog - including all neighborhood real estate stops on the Red Line Metro Rail...

Time to Invest: Don't Miss the DC Homeownership Expo and Foreclosure Clinic

The DC Department of Housing and Community Development, in partnership with the Greater Washington Urban League, the DC Housing Finance Agency and the DC Housing Authority, will hold the "DC Homeownership Expo and Foreclosure Clinic" on Saturday, June 20, 2009 at the Washington Convention Center.

 

This event, which will be held from 10 am - 2 pm, will provide residents with access to a variety of housing resources.  During the event, attendees will be able to receive free credit reports, as well as free credit and foreclosure prevention counseling.  Click here for more details:

http://newsroom.dc.gov/show.aspx/agency/dhcd/section/2/release/17119

Workshops at the Expo include:

• "Facing Foreclosure: What to Know, Who to Talk To and What to Avoid,"
• "Giving Seniors the Housing Resources They Need,"
• "The Ins and Outs of Home Rehabilitation,"
• "The Nuts and Bolts of District Programs for Homeownership," and
• "Battling Blight:  Best Practices from District Neighborhoods."

D.C. top spot for foreign real estate investors

Foreign investors in real estate expect to spend much more this year than they did in 2008, according to an annual survey by the Association of Foreign Investors in Real Estate.

After two years, D.C. regained its No. 1 status as the top global city for foreign investment in properties, followed by London and New York.

Compared to transactions completed by October 2008, equity investors plan to increase investment activity by 40 percent globally and by 73 percent in the U.S.

The D.C.-based association’s near-200 members from 21 countries -- who hold approximately $371 billion of real estate in the U.S. -- responded to the survey in the last quarter of 2008.

The U.S. provides the best opportunity for capital appreciation, according to 37 percent of the group’s members. With 16 percent of the votes, Brazil jumped 10 places to No. 2 to bump China down to No. 3.

The U.S. also gives the most stable and secure real estate investments, according to 53 percent of those surveyed.

“Our investor members have expressed a growing confidence and interest in U.S. real estate,” said James Fetgatter, chief executive of the 21-year-old association, in a statement. “Their investment plans for 2009 for the U.S. resemble the flight to quality that is creating the demand for U.S. Treasuries.”

D.C., which currently has the lowest unemployment rate in the country at 4.1 percent, was the most attractive U.S. city for investment dollars. New York (No. 2), San Francisco (No. 3), Los Angeles (No. 4) and Houston (No. 5) rounded out the top five.

Respondents said the multi-family sector was the preferred property type for their investments, followed by office, industrial, retail, and hotel properties. For the last two years, office properties came ahead of the multi-family sector.

For the first time, the survey asked to what extent a building’s “green” attributes influenced the decision to buy a property, to which 11 percent said “significantly so,” and 60 percent said “somewhat so.”

_{Washington Business Journal - by Tierney Plumb Staff Reporter}