Coldwell Banker Relocation Team

Average U.S. rates for 30-year and 15-year fixed mortgages fell to fresh record lows this week, offering more incentive for Americans to buy or refinance homes. Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan fell to 3.84 percent, the lowest since long-term mortgages began in the 1950s. That's below the previous record rate of 3.87 percent reached in February. The 15-year mortgage, a popular option for refinancing, dropped to 3.07 percent, also a record. The previous record of 3.11 percent was hit three weeks ago.

However, cheaper mortgage rates haven't done much to boost home sales. Rates have been below 4 percent for all but one week since early December. Yet sales of both previously occupied homes and new homes fell in March. Analysts suspect some of that weakness reflected a warm winter, which pulled sales that would normally occur during the spring buying season into January and February.

Still, many potential buyers can't qualify for loans or afford higher down payments required by banks. Home prices in many cities continue to fall, making those that can afford to buy uneasy about entering the market. And many who can afford to buy or refinance have already taken advantage of lower rates.

Mortgage rates are lower because they tend to track the yield on the 10-year Treasury note. Mixed news on the U.S. economy and Europe's debt crisis have led investors to buy more Treasurys, which are considered safe investments. As demand for Treasurys increases, the yield falls. To calculate the average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week. The average rage does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount. The average fee for 30-year loans was 0.8 last week, up from 0.7 the previous week. The fee on 15-year loans was 0.7, the same as last week.

The average on one-year adjustable rate loans also dropped to a record low of 2.7 percent last week, down from 2.74 percent last week. The fee on one-year adjustable rate mortgages was 0.6, unchanged from last week.

Post a Comment : Author: Tom DeRose

Share: del.icio.us Digg StumbleUpon

Homes Are Selling; New Listings Are not Coming onto the Market

Posted on May 4, 2012

I may be talking about this topic too much, but it has significant implications for the housing market in the near future. It's easy to see from the graph below of home listings and home sales in Bellingham that home sales are up (to a level that we haven't seen in 3 years), and homes listed for sale are become fewer and fewer. If this continues, there will be a shortage of homes for people to buy. What will the result of a depleted market be? Can't say.

Housing shortages are occurring elsewhere--Seattle and around the country (see the previous two blog entries). In Seattle there is a significant shortage of homes for sale below $500,000. And bidding wars are occurring.

As I've mentioned in previous blog entries, sale prices are not going up in Bellingham. In fact, in some areas of Bellingham and Whatcom County, prices are still going down. This most likely is due to the number of foreclosure that are listed. Distressed properties (short sales and foreclosures) represent at least 25% of the entire housing market. And distressed properties typically sell for less than non-distressed properties.

Post a Comment : Author: Tom DeRose

Share: del.icio.us Digg StumbleUpon

Bidding Wars Are Back.

Posted on May 2, 2012

A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back. From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today's are a result of supply shortages. "It's a little surprising because we thought bidding wars were done with," said Andy Aley, who is looking to buy his first home in Seattle's Beacon Hill neighborhood. The 31-year-old attorney was outbid this year when he offered up to $23,000 above the $357,000 listing price and agreed to waive inspections and other closing conditions. Competitive bidding in the current environment isn't producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.

An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday. "We very much believe we've hit bottom," said Ivy Zelman, chief executive of a research firm, who was among the first to warn of a downturn seven years ago. Earlier this week, she raised her home-price forecast for the year, calling for a 1% annual gain, up from a 1% decline.

The Wall Street Journal's quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. Real-estate agents consider a market balanced when there is a six-month supply of homes for sale. At the height of the housing crisis, in 2008, there was an 11.1-months' supply. In March, there was a 6.3-months' supply. Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply. Other markets have plenty of homes. Chicago, for example, has 9.4 months of supply, while New York's Long Island has 16.1 months of supply. Even in those markets, the number of houses for sale is edging down.

Increased competition is frustrating buyers and their agents. "We're writing a record number of offers, but we're not seeing a record number of closings and that's because it's so competitive," said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp. in Seattle with offices in 14 states. Nearly 83% of offers that Redfin agents have made on behalf of clients in the San Francisco Bay area this year and 71% in Southern California have had competing bids. Redfin represented a buyer that made the winning bid on a Gaithersburg, Md., home earlier this month after agreeing to adopt the dog of the seller, who was relocating and looking to find a new home for "Buddy," a white toy poodle.

Why Inventories Are Declining

Inventories are declining for a number of reasons. Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers. In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation's biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago. Banks and other mortgage investors owned nearly 450,000 foreclosed properties at the end of March, and another two million mortgages were in some stage of foreclosure.

Inventories could rise, putting more pressure on prices, if the banks and other lenders step up their efforts to sell their properties. Real-estate agents say they aren't concerned. "There's an enormous appetite for foreclosures. Release the inventory. It will sell," said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands.

The declining inventory of older homes is spurring sales of new homes. New home sales are up 16% so far this year, compared with a year ago, while inventories of new homes fell in March to their lowest level since record keeping began in 1963. Meritage Homes Corp., a builder based in Scottsdale, Ariz., reported Thursday a 36% increase in orders for the quarter ending in March versus the previous-year period.

Even though bidding wars are pushing prices higher, many homes are still selling for prices far lower than a few years ago. Increased demand is "entirely affordability driven, which tells me there will be strong resistance to price increases" by buyers, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm.

Rents are rising at a time when mortgage rates have fallen to very low levels. The result is that the monthly mortgage payment on a median-priced home is lower than any time since the 1990s. Freddie Mac reported on Thursday that mortgage rates fell to 3.88% for the average 30-year fixed rate mortgage, near its lowest recorded level. Rates are "so low that we can afford a house that was out of our price range before," said Aarthi Srinivasan, who is looking with her husband for a home around Palo Alto, Calif., one of the country's hottest real-estate markets. Ms. Srinivasan says she fears that prices are being bid up too quickly. She says she had her "aha moment" earlier this year while touring a 50-year-old house that needed extensive remodeling. The home, listed at $1.1 million, received nearly 10 offers and eventually went under contract for more than $1.3 million to a buyer who hadn't even viewed the property. "There are only so many buyers who are going to be in such a hurry, so we're hoping it'll top off soon," she says. On Monday, they offered to pay more than the $1.2 million list price for a four-bedroom, bank-owned foreclosure. They haven't found out if they made the top bid.

On the other side of those transactions are sellers like Debbie and Bill Wetherell, who had 17 offers in four days for their four-bedroom home in Danville, Calif. "I was floored. It was so fast, it was surreal," says Ms. Wetherell. The home sold on Wednesday for $796,000, more than $50,000 above the asking price. Still, the sale is for nearly $180,000 less than what they paid for the house in 2005. Ms. Wetherell's husband has commuted to Reno, Nev., for five years and they have decided to relocate.

Housing markets face other headwinds. More than 11 million homeowners owe more than their home is worth. It is a big reason that the "trade-up" market has been stalled. These homeowners can't sell their current homes, let alone come up with the down payment for their next home.

Mortgage-lending standards remain tough. Real-estate agents say an unusually high share of deals are falling apart because homes won't appraise at the price that buyers have agreed to pay sellers. Still, borrowers with stable jobs are looking to make deals. Kelly Pajela-Fu and her husband offered to pay the asking price of $600,000 for a four-bedroom home in Marblehead, Mass., within a day of the property hitting the market. "We just knew this house would go quickly," says Ms. Pajela-Fu, a 31-year-old doctor who had lost out on an earlier offer. Their strategy to avoid a bidding war paid off: The sellers accepted their offer before having an open house.

Post a Comment : Author: Tom DeRose

Share: del.icio.us Digg StumbleUpon

Home Sales Increase, Homes for Sale Decrease

Posted on May 1, 2012

It's not something that economists routinely track, but it provides a rough sense of what's happening in local real-estate markets. Call it the lowball index. A year ago, according to National Association of Realtors researchers, one of 10 members surveyed in a monthly poll complained about lowball offers on houses listed for sale. In the latest survey — conducted during March among a sample of 4,500 agents and brokers across the country and not yet released — there were hardly any. Instead, the focus of volunteered comments has shifted to declining inventory levels — fewer houses available to sell — and multiple offers on well-priced listings.

A lowball offer typically involves a contract submitted to a seller where the price proposed by the purchaser is 25 percent or more below list. Lowballs increase sharply when there's a glut of properties, asking prices are out of sync with local economic realities, and values are depressed or uncertain. Buyers figure: Hey, why not? Maybe I'll get lucky. Based on the latest survey results, that sort of strategy is not a winning move in many communities this spring. In fact, in local markets where inventories are tight and competition for homes rising, realty agents say that buyers looking to steal houses by lowballing their offers are ending up at the back of the line — their contracts either rejected out of hand or countered close to the original asking price. In high-demand, high-cost markets that have rebounded from recession slumps, sellers are now firmly in control; they pay scant attention to lowballers.

Jayne Esposito, an agent with Coldwell Banker Residential Brokerage in Los Gatos, Calif., says multiple offers are "the rule, not the exception," in her area, and many transactions end up with final contract prices higher than the listing. "Sure, I've had a few buyers try to lowball and they wouldn't listen," she said, "but that didn't work out well for them."

Similar trends are under way in more moderately priced markets. Wes Neal, an agent at Prudential Olympia in Olympia, said "lowball offers are down a lot because we're seeing more homes come on the market that are more realistically priced" — sellers have absorbed the hard lessons of the recession years about what the market can bear. Even when buyers submit shockingly low bids, sellers no longer are so insulted they send the contract back without a counter-offer. Now they negotiate aggressively and the final number ends up close to the original asking price. For example, Neal said, a buyer recently came in with a bottom-fishing offer of $150,000 on a house listed for $250,000. Though the seller was irritated, after a series of negotiations the lowball buyer settled for a final price of $230,000.

Outside Washington, D.C., in the Northern Virginia suburbs, well-priced houses in good locations move fast, sometimes pulling in multiple offers within 48 hours of listing, says Chris Ann Cleland, an agent with Long & Foster Realtors. Sellers who encounter the occasional outrageous lowball offer reminiscent of the recession years tell listing agents "don't even bother" with them.

In the suburbs south of Chicago, Judy Orr, an agent with Classic Realty Group in Orland Park, Ill., says lowball frequency and efficacy depend on the specific neighborhood or town. "We still see them, and we try to work with them" in communities where prices are soft and the impacts of tough economic times persist, she said. Elsewhere, though lowball offers are down, she urges sellers to stick with it and negotiate. Recently a lowballer came in $40,000 below the asking price. Through negotiations with the buyer, Orr managed to close the gap to just $2,000 below asking.

Marnie Matarese, an agent with J Wood Realty in Sarasota, Fla., said that while lowball offers are far fewer this spring, some out-of-town buyers still appear to be under the impression that all Florida real-estate remains depressed. They insist on submitting offers that make no sense in today's environment. But Matarese has no problem with this — "you can't blame a buyer for trying to get a good deal," she says, but the fact remains they usually risk losing the house.

The take-away: Rolling lowballs at sellers may have been an effective approach between 2008 and early 2011. But in 2012's environment — at least in rebounding markets — it could be counterproductive if you truly want to buy.

Post a Comment : Author: Tom DeRose

Share: del.icio.us Digg StumbleUpon

Interest Rates Remain Low

Posted on April 24, 2012

Current interest rates on 30 year conventional fixed rate mortgages continue to be around 3.75-3.875%. And the Feds say they will hold their rates into 2014.

Post a Comment : Author: Tom DeRose

Share: del.icio.us Digg StumbleUpon

More Information on Decreasing Inventory

Posted on April 24, 2012

In the previous entry, I talked about the fact that home sales are currently outpacing new homes coming onto the market. If this continues, there will be a shortage of homes for sale. The graph below provides more evidence of this inventory depletion. This graph shows months of inventory. Currently, there is 6.1 months of inventory. That means that if no more homes came onto the market, all current listings would be sold in 6 months. This metric is derived from the amount of current sales and the current inventory. 6 months of inventory is considered to be a neutral spot. When there is more than 6 months of inventory, it is a buyer's market. When there is less than 6 months inventory, it is a seller's market. For now, we are in a neutral stage.

What happens this month in home sales will determine if we get into a seller's market. If the trend continues, we will be in a seller's market. For the past 3+ years we have generally been in a buyer's market.

Here's some ancedotal information about what's to come. This past week at our office, 80% of our business was representing the buyer in a transaction. Only 20% of our business was representing the seller.