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.

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

Montgomery County Housing Department Offers Online Reporting of Vacant Properties

Montgomery County residents can now report vacant properties through an on-line reporting system. Vacant properties can pose a number of potential problems for neighborhoods. In an attempt to maintain the health, safety and quality of Montgomery County neighborhoods, the County’s Department of Housing and Community Affairs is seeking help in identifying properties that present a blighting influence on neighborhoods, particularly those vacant and abandoned properties in the foreclosure process.

Residents who suspect that a neighborhood property is vacant and not being maintained properly by the owner or a representative of the owner (e.g. realtor) can complete and submit a “Report a Vacant Property” form by going to www.montgomerycountymd.gov and clicking on the “I Want To” link. From there, click on “File a Complaint” and then click on “Vacant Property.”

DHCA will inspect the property to determine if the property is properly secured and if there are any housing code violations. Violations include, but are not limited to, a vacant property or one where the grass is more than 12 inches high and/or the accumulation of trash and debris. Properties in violation of the County housing code are sent a notice to correct the violation. If violations for tall grass are not corrected within 10 days, the inspector will start legal action and a contractor will be hired to complete the work, with the owner billed for the service. Time required for correcting other violations ranges from 24 hours for those affecting life safety issues to 30 days for other non-safety issues.

Existing-Home Sales Hit 5-Month High

Existing-home sales rose in July to the highest level in five months, although they continue to be well below the numbers from last year at this time, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 3.1 percent in July to a seasonally adjusted annual rate of 5 million units from a downwardly revised level of 4.85 million in June. Sales were 13.2 percent lower than the 5.76 million-unit pace in July 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the up-and-down pattern may break soon.

“We hope the new tools in the hands of home buyers from the recently enacted housing stimulus package will spark a sustained sales uptrend in the months ahead,” he said. “Buyers who’ve been on the sidelines should take a closer look at what’s available to them now in terms of financing and incentives. Given some of the inventory on the market, we also strongly encourage buyers to get a professional home inspection.”

Never Enough GOOD NEWS! But here you go...

Tired of always reading about bad news in the real estate market?  That is what sells papers these days.  Here is a new website with a positive attitude:

http://www.happyrenews.com/

From the website:

"Tired of gloom and doom stories about the US real estate market? We are, too. So welcome to Happy Real Estate News.

In real estate it's important to remember: there isn't one market out there, there are hundreds of thousands. And the factors driving these markets vary from city to city, neighborhood to neighborhood, even from street to street.

There's no denying that the mortgage meltdown has meant tragedy for many home owners. But take a look around.

You'll see there's very positive activity in many vibrant markets throughout the US. By focusing on the good news and passing the message around, we can help speed up the market recovery.

This web site is a reality check, based on actual facts on the ground. It's vital information you need to run your real estate business and educate your clients about the market in your area.

We update this information every month, so come back whenever you need to get the real story about real estate bright spots in America. "

New Housing Statistics...Good Info

According to the Census Bureaus’ Characteristics of New Housing report for 2007, the average square footage of homes is currently at a historic high. On average, a completed single-family home had 2,521 square-feet, up 2.1 percent from 2,469 square-feet in 2006. Additionally, the report provides characteristics on indoor and outdoor housing features. Data from this report gives insight into current trends to better understand today’s buyer.

Home-size findings from the report include:

• The average square footage of new homes completed has grown about 46.6 percent since 1977, when the average was 1,720 square-feet.
• About 26 percent of all new single-family homes completed in 2007 had 3,000 or more square-feet of space, up from 24 percent in 2006 and 11 percent in 1988.
• The percentage of new single-family completed with 1,200 square-feet or less of floor area shrank from 25 percent in 1973 to 4 percent in 2007.

Housing characteristics of single-family, newly-completed homes include:

• In homes with 4 or more bedrooms, over half had 3 bathrooms or more.
• Across the country, half of all homes had at least one fireplace.
• 90 percent of all homes had air conditioning.
• 67 percent of all new homes used gas as the primary source of heating fuel.
• At 32 percent, vinyl siding is the most commonly used material for the exterior of a home.

More Tax Info for Buyers in Montgomery County

Prospective home buyers in Montgomery County will get a better read on their taxes and other costs for new homes, which took effect starting April 1st.

A bill approved last December goes into effect Tuesday, and it will require sellers of homes or their agents to provide potential buyers with an estimate of property taxes and other expenses in their first year of owning the home. The information must be included on fliers at open houses or be provided directly from the seller or their agent.

The bill was meant to relieve buyers from sticker shock and hidden costs, and provide them with as much information as possible before they buy a home, said Montgomery County Council member Phil Andrews, the bill's sponsor.

As part of the legislation, a calculator for property tax is also now available on the county's Web site at www.montgomerycountymd.gov/estimatedtax.

Although the state of Maryland re-assesses residential properties every three years, the taxable assessment on a specific property is capped at a 10 percent maximum increase per year -- unless the home changes ownership. The new law should give buyers a better idea on whether they can afford a particular home, Andrews said.

Other non-tax obligations that are now required to be shared with a prospective home buyer are charges for water quality, solid waste and a Chesapeake Bay restoration fee.

The new information does not have to be included in "small print ads," such as classified newspaper or Internet ads.

Washington Business Journal