House Prices: Window of Opportunity Beginning to Close

There have been conflicting opinions as to where housing prices are headed. We want to give our opinion on this subject for the short term. We believe sellers have a window of opportunity for the next 90-120 days in most parts of the country in which to sell their homes for maximum price. We believe there will be increased downward pressure on home prices throughout the rest of the year.

Why renewed downward pressure?

Any item’s price is determined by ‘supply and demand’. In many parts of the country, existing housing inventory has dropped to historic norms in the last few months. However, an inventory of distressed properties (foreclosures and short sales) will be coming to market this year. This inventory has been delayed for over a year as the Federal and state governments crafted an agreement with the five largest banks and mortgage servicers to establish a roadmap for how a foreclosure must be properly completed. That agreement, theNational Mortgage Settlement, was reached two weeks ago.

What Impact Will the Agreement Have on Foreclosures?

Brandon Moore, chief executive of RealtyTrac, explains:

“The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year.”

How Many Foreclosures Could We Be Talking About?

Mark Vitner, a senior economist at Wells Fargo Securities tells us:

“The settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled.”

What will this mean to home prices?

As this inventory comes to market, it will impact prices in two ways:

1. It will bring to market discounted competition for buyers

2. It will impact the appraisal values of all homes in the area

Which States Will Be Impacted the Most?

The states that have the largest backlog of properties currently in the foreclosure process will be the states that will see the greatest price depreciation.

Bottom Line

There is a window of opportunity currently which sellers should take advantage of. Waiting until later this year will not guarantee a higher sales price. If anything, in many regions of the country, it probably guarantees the exact opposite.

Thank you KCM Blog for this update!

Jon Faure

If Your Goal Is to Buy Low, I Suggest You Buy Now!

There is a very famous saying which asserts “Sell High, Buy Low”. It is obviously great advice no matter what the investment. The challenge is how to determine when we have hit bottom if you are a purchaser. The only time you can guarantee a bottom is after you pass it.

However, there is more and more evidence that the COST of a home has in fact hit bottom. Notice we have used the word COST. Unless you are an all cash buyer, you must take into consideration the expense of financing a property to determine the true cost of purchasing the home. Interest rates have increased over the last quarter; and the rise in rates has counteracted any fall in prices.

Let’s look at an example:
Let’s say you were going to take out a $200,000 30-year-fixed-rate mortgage in November of 2010. At that time, interest rates were 4.17% (as per Freddie Mac). Your principle and interest payment would have come to $974.54. According to the most recent report from Case Shiller house prices fell 3.9% in the 4th quarter of 2010. The most recent report from the Federal Housing Finance Agency shows a 0.8% fall in prices. Let’s use the larger percentage decrease: 3.9%.
For the sake of keeping the math simple, we will now say you can get the same house with a $192,000 mortgage (4% discount from November price). Interest rates are now 4.95% (as per Freddie Mac).
Your principle and interest payment would now be $1,067.54.
By waiting to pay less for the PRICE of the house, the COST increased $93 a month. That adds up to $1,116 a year and over $33,000 over the life of the loan.

Bottom Line
If you want to buy low, buy now. It appears COST has hit its lowest point.

Thanks to the KCM Blog for always providing great information about the current real estate market. If you would like to read this article in it’s entirety, go to: If Your Goal Is to Buy Low, Buy Now!

Thinking of Selling? 5 Reasons You May Want to do it Now!

The conventional wisdom when selling a home has always been to wait until the ‘Spring Buying Season’. Over the years, that has seemed to make sense and is now accepted as a good strategy for those who want to sell their house and receive the best possible price. This real estate market has shattered many previously held beliefs. The wisdom of waiting for a spring market is another belief that is about to fall. Here are five reasons why?

1.) Interest Rates Are On the Rise
Interest rates have spiked up rather dramatically over the last ninety days and are now over 5%. Initially, an increase in rates has a positive effect on the market as it forces buyers off the fence. However, it also eats into a buyer’s purchasing power. As rates increase, the mortgage amount a buyer qualifies for decreases. This will eventually have a negative impact on prices.

2.) Your Dream Home Will Never Be Cheaper
If your family goal is to sell your current house and take advantage of the fabulous selection of properties currently available to buy the home of your dreams, DO IT NOW! Prices will continue to soften in most markets. However, if you are buying, COST should be more important than PRICE. Cost can be dramatically impacted by rising mortgage interest rates. Do the math and decide if now is the time.

3.) Buyers Are Out Early
There is mounting evidence that buyers are coming out earlier this year. A belief that now is a good time to buy coupled with the increase in interest rates has started the buying season early.

4.) Inventory Increases Every Spring
Every year there is an increase of inventory which comes to market as we approach the spring. Here is the number of listings available for sale in 2010.
§ February – 3,531,000
§ March – 3,626,000
§ April – 4,029,000
We believe there will be an increase in these numbers in 2011 as there is a pent-up selling demand created by the weak market of the last few years. You won’t have to worry about this increasing competition if you sell now.

5.) We Are in the Eye of the Foreclosure Storm
While banks are trying to rectify their foreclosure procedures, there is a large supply of foreclosure properties which has been delayed coming to market. This inventory will be released sometime in the next few months. When released they will be competing with your house for the buyers in the marketplace. If you are looking to sell in 2011, you want to sell before this inventory becomes your competition.

Bottom Line
These are five strong reasons to sell now instead of waiting until later in the year. Sit down with a local real estate professional today and decide the best options for you and your family.

Thanks to the KCM Blog for always providing great information about the current real estate market. If you would like to read this article in it’s entirety, go to: KCM Blog – 5 Reasons to Sell Now!

Mortgage Rates Hit New Record Low!
http://bit.ly/c655MZ

An update on the new foreclosures mess!
http://bit.ly/d47Sau

Rancho Santa Fe Foreclosure for $620k just listed
http://bit.ly/99rg2X

We need offers on the following foreclosures: http://bit.ly/9LwEiQ

Carlsbad Bressi Ranch Foreclosure: 4bd, 3.5ba, 3092 s.f. for $689,900 Just Listed http://bit.ly/a3XfcR

Look at the Cost, Not Just the Price
http://bit.ly/cVxvOX

Very cool new foreclosure listing in Vista.
http://bit.ly/9F77QQ