Thursday, September 24, 2009

Letting the Sour Housing Market Work for You

With mortgage rates inching higher every month and the doom and gloom from the experts predicting the real estate market bubble is about to burst, just about everyone is staying away from buying new homes, at least until everyone can figure out if this recession has any legs or not.

So, what reason does anyone have to buy sooner rather than later?


According to the National Association of Home Buyers, somewhere around 75 percent of builders are offering incentives right now.

A recent CNN-Money article documented this curious trend in the housing market, as things get tighter, realtors and home builders are looking for any possible enticement to get people to buy now.

For instance:

No Closing Costs
No payments for six months (Yes, on your house, this isn’t a car ad).
$10,000 towards an in-ground pool
Upgraded appliances
Free expert landscaping
Plasma TVs
$5,000 gift certificates to upgrade your home.
New Cabinets
New Countertops (granite, of course)
Marble baths
Price cuts up to 6 percent
Price cuts of 10 percent or more on new homes
Lower mortgage rates

And those are just the incentives offered from realtors and builders. If you’re looking to buy direct without the aid of a realtor, you can still get in on the incentive deals. One couple in Colorado is offering round-trip airfare to any destination in Europe, or an expensive bottle of wine to anyone who will buy their condo.

Other offers in the same area included a month of professional massages or the use of a personal chef for a period of time.

Brokers across the country are reporting similarly strange behaviour, like sellers willing to give a 20 percent discount to anyone who bought by a certain date. Or others offering merchandize, like a Vespa scooter or plane tickets to anywhere in the US if their house was bought quickly.

One unique buyer in Rhode Island was actually offering a Lexus automobile with his property.

While it’s unknown if this trend will continue, these incentives are helping to move properties that might not other wise sell as quickly. Take it as a sign of desperation or a sign of sillyness, but as long as the housing market across the United States shows signs of slowing, incentives, big and small, serious and bizarre are here to stay.

Is Your Home Market Over-Valued?

In every industry, there are people that think positive and people that look at things from more of a negative point of view. Even when things are going their best and everyone involved is making money hand over fist, you always have a dedicated group of nay-sayers that are predicting doom and gloom.

A few months ago, those voices started to get louder and louder in the real estate market. The positive thinkers pointed to incredibly low mortgage rates and record sales and said everything was all right. Unfortunately, in this case, the doom and gloomers might have been on target.

A new survey shows that an increasing number of housing markets in the United States might be overvalued, and as the logic suggests, an overvalued real estate market translates into a slower real estate market.

The main culprit is rising interest rates.

The rate for fixed mortgages (30-year) is up over half a percent in the past year, and the rates on adjustable-rate mortgages is up even more.

The real estate market that was deemed to be the most overvalued was in Naples, Florida, where the study deemed to be 101.5% higher than what National City considered to be fair value.

The city of Bend, Oregon was second in the study, coming in at almost 90%.

If you’re looking for real estate markets that still have deals, head to the great state of Texas. All five of the most undervalued markets were in the Lone Star State, led by College Station (home of the Texas A&M Aggies) which was deemed to be over 22% undervalued. Dallas was second on the list at 21% undervalued.

But how do you know if your housing market is overvalued?

Chances are, if you live in California or Florida, it is. Nine of the top ten overvalued markets are in either Florida or California, with Salinas, Merced and Madera, California ranked 3, 4 and 5. Port St. Lucie, Florida is deemed to be 74% overvalued, good enough for number 6. Stockton and Santa Barbara, California take 7 and 8, while Florida takes the final two spots at 9 and 10 with Miami (70.8%) and Punta Gorda (70.2%).

While this may be a sure sign of a pending real estate slump, the best thing any potential investor can do is take a long, hard look at all available research before you decide to take a positive or negative outlook.

Is the Bottom Falling Out of U.S. Real Estate?

A dominant theme as of late in the real estate news has been the idea that the bubble is about to burst. Depending on who you read and what you believe, it’s either going to be a minor speed bump that only a few investors will even feel, or it’s going to be a elevator drop straight down, accompanied with a nuclear winter that will last until demand once again passes up supply.

While no one can see the future, a recent prediction by the National Association of Realtors paints a gloomy picture. For the first time since 1991, prices on new houses will actually fall this year. Prices on existing homes are still predicted to rise, but it will be the smallest rise ever. The main cause of this shift it thought to be a glut of supply and not enough demand.

This fall in price, while not steep by anyone’s definition is expected to be around 0.2 percent, which would put the median price for a new home in the US at $240,500. The drop seen in 1991, 2.4%, was much worse.

The five-year boom is housing in the US is expected to come to an end this year, and the almost unchecked about of building during that time is what’s causing it. The amount of business many of the industry leaders have done this year in new home building is down sharply, compared to sky rocking business over the previous few years.

While no one likes a downturn in business, many investors have a nice nest egg, thanks to the 11 percent increase in new home prices over the last 11 years. Just to give you some perspective, the average over the last 50 years is an increase of 5 percent.

Although final numbers aren’t in yet, the drop in previously owned homes is looking to be down almost nine percent this year, while the drop in new-home sales is down a whopping 17.3 percent. And while the drop isn’t good news, the final numbers at the end of this year will still be the fourth most ever.

So, this leaves us with the question, how far will it fall? That is the billion dollar question. No one knows for sure, but be warned if you’re looking to invest in real estate over the next few years, the elevator may continue to fall for years.

Is Discount Real Estate Brokers For Real?

When most people think about real estate, the first thing that comes to their minds is dollar signs. And usually not just one. Several. And it’s just not the actual land or structures that cause the dollar signs to start flashing, it’s the usual 6 percent real estate commission that goes along with hiring a legitimate real estate agent. But does it have to be that way? Are there cheaper ways to buy and sell real estate that can be trusted?

Well, it really depends on how much you know about the real estate game. There are hundreds of companies out there, many of them based on the Internet, that offer discounted real estate services, but they only do part of the job. But can they save you money? Without a doubt. Most of the online real estate companies only charge a few hundred dollars for their services, while the usual six percent charged by a full service real estate broker can stretch into the thousands of dollars.

In Texas recently, major real estate companies have begun to play hardball. The Federal Trade Commission charged a local realtors board with not playing fair with their competition, so clearly, major real estate companies see these cheaper alternatives as a threat. Not to be outdone, there are similar realtor boards in other states, such as Utah, Michigan and Colorado that have done the same thing. They are expecting a review by the FTC sooner rather than later.

The big difference between the way that things have always been done (through a realtor) and the way things are done now is all about availability of information. Many online sites that offer discount house or property listings don’t assist you outright in trying to figure out what points are or try to figure how much your closing costs are going to be, but they do provide the groundwork for how to figure all that out for yourself. They have primers detailing dirty tricks the bank might pull. They have FAQs about the basics of dealing in real estate. Essentially, they have all the information that a real estate agent is going to tell you on their sites so they don’t have to charge you extra.

The ongoing battle between online and “legitimate” full-service realtors is something that is going to be around for a long time. As long as there are self-motivated people who believe that they can do it themselves, online realtors will continue to thrive. The big question to ask yourself is how much do you know about the real estate business and how much responsibility are you willing to take on.

How to Unpack without Exploding

One of the forgotten steps in moving is the fact that physically moving your belongings from one spot to another is only part of the deal. Once you get your boxes and your mattress and your desk to its final destination, you still have to be able to find everything and put everything where it belongs. A rule of thumb when surveying your house is that no matter how many box-fulls you think you have, a good idea is to at least increase your most generous estimate by at least 50 percent. And remember, for every box you pack, that’s a box you have to unpack.

According to data from the US Census, 14 percent of all American households last year moved. That translates to somewhere around 40 million people switching addresses.

Most of us take weeks, sometimes months to slowly and painstakingly categorize, wrap and pack all of our belongings. We spend months looking at prospective houses, arguing with our real estate agent and we spend days with our fingers crossed hoping we got the property we wanted.

But once you do get your dream house, then what? You took all this time to get everything ready and then you leave yourself….
… move everything. Yup, it’s just about as crazy as it sounds. But fear not, there are some common sense tips to keep your head from exploding. If you have the money, there are several companies out there that will help you pack up everything, and then once the movers do their thing, they will unpack pretty much everything. They will even take the boxes with them when they go. They will hang pictures, put your toothbrush in the bathroom and put the sheets on the bed. They will even get the computer up and running.

But, as you can imagine, these types of services aren’t cheap. If they aren’t in your budget, here are some good tips for do-it-yourselfers.

See-through is your friend. Stay away from opaque brown cardboard boxes and try to use as much clear packing material as you can. Clear plastic bins, Ziploc bags for small things, anything that you can think of that is clear and can hold large amounts of stuff.

Lists Lists Lists. Write down what goes in every single box, so when you wake up that first morning in your beautiful new home and you want that first cup of coffee, all you have to do is grab that list and see that it’s in box 91.

Have the utilities turned on before you move in. This is especially important if you have kids. Moves are traumatic enough for adults, but when little Johnny is having his universe ripped apart, it helps to be able to plop the kids in front of Dora the Explorer for a bit while you try to recover from exhaustion.

While nothing can really prepare you for the mental and physical stress of moving day, being prepared and taking a few common sense steps can help keep things from getting too out of hand.