Posted May 12, 2010 10:02am EDT Yahoo Finance
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Among the crowded ranks of economists and market watchers, Dean Baker stands out. Baker presciently called the housing bubble when he published  “The Run-up in Home Prices: Is It Real or Is It Another Bubble?” in 2002.

So does our guest Baker see the so-called housing recovery now? “No. I mean I think people that are saying that just aren’t paying attention to what’s in front of their eyes,” says Baker, an American economist and co-director of the Center for Economic and Policy Research.

“I think we’re going to see a big fall-off in purchases for the rest of 2010 and even into 2011,” Baker says. “So the idea that somehow the market is stable, that housing prices will rise anytime soon – it’s really hard to make a case for that.”

Baker lays out several reasons for his bearish case:

• Programs that lifted the market, including the tax credit for first-time buyers, have expired.
• The Federal Reserve is exiting the mortgage market, which will likely push rates to 5.5% to 6% by the end of the year.
• There’s still an inventory glut and rental rates are falling in many markets, notes Baker, author of “False Profits: Recovering from the Bubble Economy.” He says the rental market doesn’t lie.

Naturally the housing bulls disagree. Hedge-fund manager John Paulson, for example, said housing prices in hard-hit California will begin to rise this year, setting the stage for a wider recovery, as the FT reports.

So what are the chances of, say, another tax credit or purchase of mortgage-backed securities? “I think they’d be reluctant to do that because of the signal it would send,” Baker says in the accompanying clip. “I mean it would send this unambiguous signal things really are bad, worse than had been advertised.”

Click on the player to learn about Baker’s idea to let struggling homeowners stay in their homes, and prevent home inventory from climbing even higher.

The meltdown of the U.S. housing market is not over yet, and home prices will soon start trekking downward again as a flood of foreclosures looms, a well-known economist said Wednesday.
Mark Zandi, chief economist at at Moody’s Economy.com in West Chester, Pennsylvania, said in an interview with Reuters home prices will resume their decline by early next year as foreclosure sales pick up again. “The housing crash is not over,” he said. The U.S. housing market has suffered the worst downturn since the Great Depression, and its impact has rippled through the recession-hit economy as well as the rest of the world. A setback for the hard-hit housing market could portend problems for the U.S. economy.

Home prices, as measured by the Standard & Poor’s/Case-Shiller U.S. National Home Price Index, will trough in the third quarter of 2010 after declining 38 percent, Zandi said. The index peaked in the second quarter of 2006 and hit a trough in the first quarter of 2009, a drop of about 32 percent. Home prices in many regions have been rising. That is because foreclosure sales fell over the summer and fall as mortgage servicers have tried to put stressed homeowners into the Home Affordable Modification Program and other modification plans, he said. “This lull in foreclosures sales has resulted in the price gains in the past few months,” he said. “Foreclosure sales will increase, and home prices will resume their decline by early 2010 as mortgage servicers figure out who will not qualify for a modification,” he said.

Zandi said 7.5 million foreclosure sales will have taken place between 2006 and 2011. The majority of these sales, however, have not emerged yet, with 4.8 million foreclosure sales expected between 2009 and 2011. Attractive rates and high affordability have been positives for the U.S. housing market, which has been showing signs of stabilization. Sales have surged in recent months as buyers scrambled to take advantage of the government’s first-time home buyer tax credit, which was originally set to end Nov. 30.
Last month the Omaha administration extended the $8,000 first-time home buyer tax credit, added a $6,500 credit for home owners buying a new residence, and increased income limits. Eligible borrowers must sign contracts by April 30 and close loans by June 30.

Zandi said another significant obstacle to a housing market recovery is the number of mortgages that are “underwater,” where borrowers owe more for the loan than the residence is worth. This negative equity disqualifies many homeowners from refinancing and prevents some from selling their homes. Borrowers in negative equity are also more prone to defaults and foreclosures. Zandi said about 25 percent of single-family homes with mortgages have negative equity. “With so many homeowners so deeply underwater and unemployment very high and on the rise, the foreclosure crisis will continue putting more pressure on home prices,” he said.

The U.S. Labor Department said the unemployment rate reached a 26-1/2-year high of 10.2 percent in October. November’s unemployment rate in November will be announced Friday. “Our house price outlook is dependent on two other key assumptions, including a more stable job market by early 2010 and that interest rates on fixed-rate mortgages remain well below 6 percent throughout the year,” he said. The unemployment rate will peak at 10.7 percent in the third quarter of 2010, Zandi forecast.

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WASHINGTON — The average interest rate for a 30-year mortgage dropped to a record low of 4.71 percent this week, pushed down by an aggressive government campaign to reduce borrowing costs. The rate, published Thursday by Freddie Mac, is the lowest since the mortgage finance company began tracking the data in 1971. The previous record of 4.78 percent was set during the week ending April 30 and matched last week. The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make home buying more affordable and prop up the housing market.

Despite the government support, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent down payment. Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders across the country. Rates often fluctuate significantly, even within a given day, often tracking yields on long-term Treasury bonds. This week drop reflects a rush of investors into the security of government debt after concerns about financial trouble in Dubai drove investors to safe harbors. But rates climbed back later in the week, and analysts say they are likely to remain volatile. “There are no guarantees that mortgage rates are going to stay at these low levels,” said Greg McBride, senior financial analyst at Bankrate.com.

And millions of American families have not been able to take advantage of them, particularly in the areas where home prices have fallen the most. About 11 million households, or 23 percent of homeowners with a mortgage, owe more on their home loans than their house is currently worth according to First American CoreLogic, a real estate information company. That makes refinancing difficult. While the government has launched a program designed to help these “underwater” borrowers, only about 140,000 homeowners have used it so far. In Orlando, mortgage broker Chris Brown says the low rates are a boon to first-time homebuyers who can qualify for a loan. But he says he isn’t getting much business from homeowners looking to refinance. “Most of the people that could refinance probably have” done so, he said. “Rates have been artificially low for quite some time.”

The average rate on a 15-year fixed-rate mortgage fell to a record low of 4.27 percent, from 4.29 percent last week, according to Freddie Mac. Rates on five-year, adjustable-rate mortgages averaged 4.19 percent, up from 4.18 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.25 percent from 4.35 percent. The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans. Buyers and homeowners who want to refinance are picking up their phones. Mortgage applications rose 2 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday, driven by a more than 4 percent increase in purchase applications and a nearly 2 percent increase in applications to refinance existing loans.

By: Thomas Content of the Journal Sentinel

Date: Nov. 19, 2009

Source: Milwaukee Journal Sentinel 20 November 09

Link: http://www.jsonline.com/business/70478967.html

Some fear foreclosure pace could accelerate

One of every nine homeowners in Wisconsin was behind on mortgage payments or in foreclosure at the end of September – a record level that industry observers said Thursday is likely to rise. The state continues to fare better than the nation, however, as delinquencies or foreclosures now account for one of every seven loans across the country, the Mortgage Bankers Association said in its quarterly report. The report found more than 11% of Wisconsin loans and more than 14% of national loans were either in foreclosure or delinquent at the end of the quarter, with both rates up sharply from the same time last year. It was a record-high figure for the ninth straight quarter. The data suggest the housing market and the broader recovery will remain under pressure from the surge in home-loan defaults, especially as unemployment keeps rising. Lost jobs are the main reason homeowners are falling behind on their mortgages.

After three years of plunging prices, the housing market started to rebound this summer. That lifted hopes for the overall economy. But analysts say there are too many foreclosed homes that have yet to be dumped on the market, and they expect further price declines. The outlook is grim, as job losses and adjustable-rate mortgages resetting at higher rates pack a one-two punch for homeowners getting behind on mortgage payments. “The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve,” said Jay Brinkmann, chief economist at the Mortgage Bankers Association. “First, it is unlikely the employment picture will get better until sometime next year, and even then jobs will increase at a very slow pace. “Perhaps more importantly, there is no reason to expect that, when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates.”

Foreclosure rates are rising in Wisconsin, which ranks 17th in the nation in foreclosures started during the third quarter. By contrast, Wisconsin ranked 36th in the nation in delinquencies. “What happened is Wisconsin was lagging the nation as a whole, and now it’s starting to pick up and really accelerate,” said bankruptcy and foreclosure lawyer David Liebowitz of Lakelaw in Kenosha.

Subprime loans a concern

An increase in foreclosures had been forecast earlier this year by Milwaukee Mayor Tom Barrett, even after the county posted a 77% jump in foreclosures in 2008 compared with 2007. A sizable number of mortgages with adjustable rates are resetting in 2010, which could mean the trends will persist. Catey Doyle, chief staff attorney with the Legal Aid Society in Milwaukee, said statewide foreclosures could hit 30,000 this year, up from 24,500 last year. Of particular concern in Wisconsin are subprime loans, higher-interest mortgages sold to people with shakier credit histories. The MBA analysis found that 27.4% of Wisconsin subprime loans were delinquent, slightly higher than the national rate of 26.7%. Wisconsin ranked 10th in the nation in the percentage of home loans that have gone to foreclosure.

Doyle said she’s surprised to see how many subprime loans have been made in recent years across the state – and not just in Milwaukee. She said she analyzed several days of foreclosures across the state and was surprised to see that three of four problem loans across the state involved subprime loans. “We’re seeing a lot of bad mortgages that have adjustable-rate mortgages that have just hit the point where homeowners finally are not able to make the payments,” she said. “We’re also seeing an increase in people who have had a period of unemployment. They’re either unemployed now, or were for a time, and may be re-employed but at a much lower income level.”

The delinquency rate in Wisconsin for loans on residential properties stood at 7.66% at the end of the third quarter, up from 6.86% three months earlier, according to data released Thursday by the Mortgage Bankers Association. It’s up from 5.59% this time last year.

Crisis worse elsewhere

But Wisconsin continues to fare better than the nation as a whole and most nearby states in keeping current on house payments. Nationally, the delinquency rate on residential properties was 9.94%, up from 8.86% in the second quarter. Wisconsin has been consistent in not seeing the serious effects of the foreclosure crisis, which has hit hardest in Florida, California, Arizona and Nevada. Those states “have a disproportionate share of the mortgage problems,” accounting for 43% of all foreclosures started in the third quarter, the MBA’s Brinkmann said.

The delinquency rate excludes loans in the process of foreclosure. The percentage of loans in Wisconsin on which foreclosure was started during the quarter rose 3 basis points to 1.06%, while the percentage of loans in the foreclosure process at the end of the quarter increased 8 basis points to 3.65%. The rates were not seasonally adjusted. Mortgage delinquency rates normally rise between the second and third quarter of the year because of a variety of seasonal factors, according to the association. “There are options out there to help them, but at times what we see is that people don’t contact us until it’s too late, and sometimes they don’t return our repeated phone calls to let them know they’re late on their mortgage and we want to talk to them,” said Kurt Bauer, chief executive of the Wisconsin Bankers Association. “They may be embarrassed and don’t think that there are any options available.”

Date: 30 November 2009

Link: http://www.cnbc.com/id/34207654

Should homeowners who are behind in their mortgage be allowed to just walk way from the payments? A University of Arizona law professor suggests that maybe they should. While not recommending that homeowners forgo their responsibilities, Professor Brent White told CNBC Monday that there is a different set of rules for the business community and homeowners. “There’s a double standard when it comes to banks and homeowners,” said White. “Businesses often walk away from bad contracts, but homeowners can’t. The banks need to modify bad loans.” White recently issued an academic paper saying that he’s surprised that more of the 15 million US homeowners who have underwater mortgages—or mortgages that are worth more than the value of the house— are still continuing to pay. White said he was not advocating what homeowners should do, but raising a key issue—that homeowners need to think what’s best for them.

Somewhat predictably, those within the real estate industry are not endorsing White’s point of view. “It’s not a responsible thing to do (not pay a mortgage),” National Association of Realtors spokesman Walter Maloney said. “He’s making assumptions about property values that are not correct. Values are starting to stabilize. More important, it’s not ethical to walk away from the mortgage.” But White, in his paper, is throwing ethics right out of the equation. He says, people are too worried about the feelings of shame and embarrassment of a possible foreclosure and “ignore the powerful financial reasons for doing so.” White attacks the banks in his thesis for “being slow to modify troubled mortgages and reluctant to reduce principal debts” with falling housing prices. He says homeowners have to think about themselves and what’s do right for them. And White says the penalties for skipping mortgage payments are “not as bad as people think.” He says that “if you stay current with other creditors, one can have a good credit rating within two years. Most individuals should be able to plan in advance for a few years of limited credit.”

But having a bad credit rating even just for a couple of years, should not be a goal, says Diane Saatchi, vice president of Corcoran Realty, in East Hampton, New York. “I grew up knowing your most valuable asset is your credit rating,” Saatchi says. “It’s foolish to deliberately make credit rating worse. If you can’t or won’t make the payments, get in touch with lender, and work it out.” In his paper, White laid out his strategy for the non-payment program: homeowners would buy the items they’ll need, like a car or even another house, over a couple of years just before they stop making mortgage payments and are eventually forced out of the home. But that’s not much of a plan says Greg McBride, senior analyst at Bankrate.com. “Buying a home is long term investment, it’s not a get rich quick scheme,” says McBride. “If you can make the payments you should, unless there’s a major event, like a job loss or transfer that makes things worse. If that happens, you can negotiate with the bank.”

While White’s ideas are mostly considered extreme within the housing industry, there is an alternative to stopping mortgage payments if you want leave a house that is “underwater’, says Johnny Martinelli Broker owner of Levy Mart Real Estate in Norman, Oklahoma. “It’s called deed in lieu,” says Martinelli. “Say your house is worth $140,000 and the mortgage is valued at $200,000. You could go to the bank and say here’s the deed. If the bank agrees, they would take over the house. But you would have to claim the difference of the $60,000 on your tax returns. That’s considered income. Of course, you have to find another place to live.” The tax rules can vary at times, due to recent changes in guidelines. Martinelli says this type of deal is better than a foreclosure and wouldn’t hurt a homeowner’s credit rating as much. Advantages to a lender include a reduction in the time and cost of a repossession, which can take months. Not all banks might accept such an offer, but there are some that do, says Martinelli.

Most analysts agree that if a homeowner can pay the loan, do so even if the value has dropped. If the owner can’t afford the payments, go to the lender to try and work out a lower payment. Not all lenders will, but experts advise trying. There’s also a short sale if the house must be sold. That’s where the mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the homeowner. The homeowner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Whatever action a homeowner is contemplating, they should think long and hard before doing something that could be short sited says Diane Saatchi. “Blaming the bank is a losing proposition and could have long term consequences,” Saatchi says “Don’t think by not paying your mortgage you’re able to get ahead financially. It’s a risky idea and not worth it.”

Date: 18 November 2009

Link: http://www.cnbc.com/id/34018204/

If you already took advantage of the government’s tax credit for first-time homebuyers—or are planning to do it anytime soon—you’ll probably agree with this prediction: Sales of existing homes will peak in the final quarter of 2009, then begin a year-long slide, which is likely to be a sharp one, according to some estimates. “Most of it [the tax credit] is simply shifting sales from one period to another,” says Global Insight economist Patrick Newport. “It doesn’t get rid of the fundamental problem; there’s still a glut of houses.” Newport, for instance, expects single-family home sales to hit an annual rate of 5.88 million units in the fourth quarter (vs. 5.30 in the third quarter). Thereafter, sales will fall to 5.65 million in the first quarter and average just 4.75 million in the second half of the year. “We expect a little stall in 2010,” says David Crowe, chief economist at the National Association of Home Builders. “I agree, you do advance demand, so you steal it for the future.” The builders’ group has a similar forecast, with sales peaking at 5.60 million units in the first quarter and bottoming at 4.50 million in the third quarter, for a 2010 average of 5.15 million. That’s marginally above the 2008 rate of 4.91 million.

The accuracy of those forecast depends—like many things about the economy these days—on the job market, whose recovery is looking a bit delayed, based on historical patterns. Some proponents of the tax credit, as well its recent expansion to repeat buyers and extension from the end of November through that of April, assumed it would prompt some people to purchase sooner than they originally intended, but those purchases would later be replaced by another group of buyers who were no longer concerned about job security. “The economy and the job market didn’t pick up as people expected in ‘09 and as a consequence that is rolling it in 2010,” says Crowe. There’s even some doubt that the $6500 credit for repeat buyers will make much of a difference. The original credit did not have the expected trickle-down effect on new homes. “I don’t know if the expansion is really going to get anyone else into the market, if you think about what the transaction costs,” says Andrew Jakobovics, associate director for housing and economics at the Center for American Progress. “The people who are going to take advantage of it were going to move anyway.” And by most analysis, that’s unlikely to be enough.

Most economists see the jobless rate—now 10.3 percent—peaking around 11 percent sometime in early to mid 2010 and then creeping down to around 10 percent by the end of the year. That’s too high to make much of a dent in the current glut. Inventory levels are now at an 8-9-month supply–Down from the 10-11-month levels of early 2009, but still above the 6-7-month goal. “At the end of 2010, you’re still going to have that glut,” says Newport. Another casualty of the job market is household creation, which has meant a steady stream of buyers in the past, helping keep inventories at a healthy level. In 2008, for the first time in years, household creation fell—and sharply, too. At the same time, the number of young adults living at home and average marriage ages increased. More recently, there has been a flattening. “A lot of the new households will be renters or stay renters,” says Jakabovics. Given such headwinds, you might think it difficult to find optimists on housing, but they are loud and strong. “I believe there is this pent up demand,” says the group’s chief economist Lawrence Yun. “It is just a question of bringing buyers into the market and absorbing the inventory.”

The NAR admits shifting demand has been a minor factor, but says fundamentals are improving, such that 2010 will bring the first increase in homes price in years. “One thing that has been a drag will no longer be in place–that buyers expect prices to decline,” says Yun. “Inventory will be brought down to a level consistent with home values growing modestly.” NAR expects house prices to rise 4 percent in 2010 with sales hitting 5.7 million units, slightly above the 2007 rate. About 15 percent of sales will be the result of the tax credit, which requires a contract by the end of April and closing by the end of June. Fannie Mae is predicting sales of around 5 million and a price decline of just under 2-percent.) The NAR forecasts may be difficult to hit given that home foreclosures and mortgage delinquencies are at or near record highs Richard Smith, CEO of the national real estate company Realogy, is not as optimistic about price appreciation, but he does see something of “a perfect scenario” for the market.

Smith, whose company’s brands include Coldwell Banker and Century 21, says any change in employment, even sentiment, will help sales in general, while a snapback in new household creation will mean the traditional supply of new buyers. Historically low interest rates—which may creep up a full percent over the next 14 months—will still be low enough to keep home affordability high. “There have been times in the past three or four years you could be very cynical about housing,” says Smith. “This is not one of them.“

Source: cnbc.com
Date: 28 October 2009
Link: http://www.cnbc.com/id/33506191

Sales of new U.S. homes unexpectedly tumbled in September, their first drop in six months, underscoring the hazards to an economic recovery that businesses appeared to be banking on. New single-family home sales fell 3.6 percent to a 440,000 until annual pace from a downwardly revised 417,000 units in August, The Commerce Department said Wednesday. Analysts polled by Reuters had expected sales to rise to a 440,000 unit pace from August’s previously reported 429,000.

A separate report from the Mortgage Bankers Association on Wednesday showed demand for mortgages has fallen for the past three weeks as buyers move to the sidelines ahead of the Nov. 30 expiration of a popular home-buyers’ tax credit. The housing data represented a road bump in a recovery that otherwise appears to be widening. Another report from the Commerce Department showed that new orders for long-lasting U.S. manufactured goods rose 1 percent in September as business stepped-up investment plans.

“One month is obviously not a trend and I think there is plenty of evidence that things are turning around. I still believe the economy has hit bottom and is on the way up, but it will be a long, slow process,” said Mark Bonhard, an investment advisor at Dawson Wealth Management in Cleveland, Ohio. U.S. stock indexes extended losses when the data was released, while U.S. Treasury prices added to gains and the U.S. dollar rose against the euro. Despite the drop in sales, the number of new homes for sale at the end of the month shrank to its smallest in 27 years, leaving the supply of homes available at 7.5 months’ worth. The median sales price rose in September to $204,800 from $199,900, while the average sales price rose to $282,600 from $265,500.

The new home-buyer tax credit affected recent housing market trends, Cary Leahey, economist at Decision Economics in New York, said. The $8,000 credit, which expires on Nov. 30, helped lift the housing market from its deepest downturn since the Great Depression. U.S. lawmakers are considering extending it. “There are some distortions because of the new home-buyer tax credit, but we can say housing sales have bottomed,” Leahy said. “Some are afraid housing will fade in 2010. That will not happen unless the labor market fades or does not improve.”

The Mortgage Bankers Association said its mortgage applications index fell 12.3 percent to 562.3 in the week ended Oct. 23, with purchase applications the weakest since mid-May and refinancing requests at a two-month low. Eligible borrowers who applied last week would unlikely be able to close their loan by the scheduled Nov. 30 expiration of the tax credit, industry experts said.

Source: cnbc.com
Date: 8 October 2009
Link: http://www.cnbc.com/id/33068926/

With prices still depressed in many parts the residential real estate market, homeowners these days are looking to eke out as much profit as they can from the sale of their home. Yet, with the high inventory of available properties, especially foreclosed or short sale ones, it’s hard, if not impossible, to get your price.

Enter: For sale by owner (FSBO).

By cutting out the middle man and selling your home yourself, you could walk away with tens of thousands of dollars more in your pocket. It just takes a little marketing know-how and a lot of entrepreneurial spirit. “A lot of people who are selling right now are doing so because they’re changing jobs or changing lifestyles and they’re selling by owner because they know it’s going to immediately save them 5-6 percent on commission costs,” says Eric Mangan, a spokesman for ForSaleByOwner.com, a sell-by-owner listing service. “In today’s market, where prices have dropped by double digits in some cases, the cost of using a realtor is that much more expensive.” Indeed, without a real estate agent you could lower your asking price by up to 6 percent to comparable listings in your community and help sell your house faster. Better yet, leave your price on par and pocket the commission that would normally go to the realtor. (On a $350,000 house, a 6-percent commission is $21,000.)

Who’s Doing It
Despite the financial incentive and growing access to online listing services, the FSBO (pronounced “fizzbo”) market has been trending down from a high of 19 percent of the market in 1997 to roughly 13 percent today, according to the National Association of Realtors (NAR). Some 81 percent of home sellers still use full-service realtors, 9 percent rely on limited service providers, including discount brokerages and the remaining sellers, and roughly 9 percent use minimal service (including FSBOs and those who pay only for the use of an MLS). About 45 percent of FSBO transactions involved people who already knew each other, such as family members or acquaintance. According to NAR’s Walter Molony, the majority of homeowners still rely on agents because their home is often their largest asset and they want an experienced professional on hand to protect their interests. Indeed, some homeowners still require the help of realtors to sell their home. Among them: those who can’t be physically on site to show their property and those not comfortable selling or promoting their houses.

While the real estate recession has some homeowners wary of selling solo, however, Mangan maintains the sell-by-owner strategy is actually easier than most homeowners imagine—and makes more sense today than during the boom. “It takes education about your local real estate marketing, including recent sales activity and some knowledge of what’s currently on the market,” he says. “Other little things are more important today, too, like being more flexible with a buyer’s closing time frame.” If your buyer needs to close within 30 days and you’re not ready to move, find an apartment and store your furniture. Be prepared to do whatever it takes. The housing slump, of course, also makes it more important to market your home effectively.

Above all, that means listing your house for a fair price. It’s easy enough to find out what your home is worth. Sites like realtor.com, zillow.com and homegain.com can help you review comparable real estate listings available in your neighborhood. You should also ask a realtor or two to stop by for a comparative market analysis. They don’t charge for the service, you can be honest about your intent to sell-by-owner (they’ll be waiting if it doesn’t work out) and they might even give you some good ideas on quick fixes to help you sell faster. Once you’ve arrived at a fair market price, you can either list for that amount or, considering the growing inventory of available homes, discount your price just enough to position your property as a bargain. For example, if your home would normally list for $450,000 with a realtor, consider lowering your asking price by 3 percent to $436,500. If you’re really eager to sell, you could reduce by 4 percent and sell for $432,000, while still coming out ahead.

What You May Need
Even a well priced home, however, isn’t going to move if buyers don’t know it exists. Ads in the local newspaper, which cost as little as $25 per month, can be surprisingly effective, considering a large percentage of buyers across the country upgrade into homes within their existing community. But you’ll have better luck if you pony up for a listing service, which publishes the specifics of available homes to realtors and potential buyers. Packages priced at $229 and up also include a yard sign kit, access to a consultation line and automatic syndication of the listing to the real estate sections of partner Web sites like Google, Yahoo and USAToday. Higher-priced packages, which run as high as $809, also include a listing on Realtor.com and on the MLS.” ByOwner.com, meanwhile, charges from $300 to $400 for its listings, which will remain on the site until sold. Both companies provide yard signs, printable flyers and instructional material to help you prepare, price and negotiate the sale of your home.

Screen, screen, screen
With banks continuing to tighten their lending restrictions, it’s more important than ever to get your buyers prequalified or preapproved. As the seller, you should demand a pre-approved mortgage letter with any written offer potential buyers make. And, as with any real estate transaction, don’t forget to work with a lawyer or title company during the closing, to ensure both you and the buyer have a legal representative who understands the process and is looking out for your best interests.

The Downside
Before you set out to save a buck, of course, there are some potential disadvantages to consider. For starters, there’s the added time commitment of showing your own home. (If you’re at work, you may miss a sale.) You may also feel uncomfortable opening your home to just anyone—whereas a realtor is bringing only bona fide potential buyers to your door. Realtors also, of course, handle all the paperwork, provide legally binding contracts that account for local disclosure ordinances and know which lender to direct your low credit score-buyers to when their financing goes sour. Finally, because they are exposed to a wider audience of potential buyers, some would argue agents may be able to obtain a higher sales price for your home, which can offset some or all of their commission. A 2008 survey by NAR found the median price for sellers who used an agent was $211,000, while homes sold directly by the owners fetched closer to $153,000. (Molony notes, however, the significant price spread in the most recent survey was partly due to the fact that FSBO properties were more likely to be in rural areas, and more likely to be manufactured or mobile homes. That suggests the homes might be worth less to begin with, he said.) A smaller survey by Northwestern University of all homes sold in Madison, Wisc. between 1998 and 2004 found those who joined a for-sale-by-owner Web site got as least as much for their homes as sellers who either used an agent or the MLS. The study shows that FSBO sellers ended up with a “significantly enhanced net sale price because they didn’t have to pay the brokerage commission that real estate agents charge sellers, generally 6 percent of a house’s sale price,” the summary report said. It did find, however, that homes sold through the MLS were more likely to sell faster—20 days faster on average. (And that was during the real estate boom.) It also found that over 20 percent of FSBO listings did not sell by owner, and ultimately had to list anew on the MLS. The increased time to sell can be tough to swallow for homeowners who are carrying two mortgages at once. If your home sits too many extra months on the market, of course, it would have been cheaper to simply hire an agent and cough up the commission. Yet, despite the potential drawbacks, the cost benefit of selling your home on your own makes it worth considering if you can afford to wait for a buyer, are prepared to market your home effectively and aren’t afraid to do the legwork yourself.

Source: cnbc.com
Date: 8 October 2009
Link: http://www.cnbc.com/id/32893590

If you’re planning to put your home on the market, it’s not your manners that need polishing. Try your silver, among other improvements. Now, more than ever, getting a signed contract in hand is all about price and quality. Here’s a few tips to selling your house in a tough market.

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Price Is A Science

“The biggest mistake sellers make today is that they don’t price their homes correctly,” says Elizabeth Weintraub, a broker with Lyon’s Real Estate in downtown Sacramento. “If a house sits on the market, people start to wonder, ‘what’s wrong with that property. How come it’s not selling?’” She says pricing is an art and a science, and also depends on the local market. In Sacramento, for example, home sellers are competing directly with foreclosures and short sales (when a seller owes more on a property than it is worth and the bank agrees to accept less than the amount of the mortgage). “In the past, if there was a home that was sold as a foreclosure on your street, it was an isolated circumstance. Now, because of the high number of foreclosures and short sales, they are the comparable sales,” Weintraub says. “If your price is not competitive with these numbers, it might not get shown at all.”

Her pricing method: look at pending sales. These will become the comparable sales. Even though they don’t say the exact sale price, you can make an educated guess or find out from the listing agent. Weintraub also says that if you put your house on the market and it doesn’t sell after 90 days, take it off the market and list it again at another time. “You don’t want it to become stale.” Mary Ann Grabel of Greenwich Fine Properties in Greenwich, Connecticut, agrees. “It’s all about price,” Grabel says. “People who really want or need to sell are willing to take less than what they paid two or three years ago.”

Condition, Not Conditions

Tom Apligian, whose Re/Max office in Plano, Texas serves the Dallas suburbs, says that “while kitchens and bathrooms still sell houses, what used to work in the past doesn’t anymore.” “Going back four or five years, we used to do a decorating allowance,” Apligian says, referring to the money that sellers would offer buyers to cover new carpet or other decorative items. Now, he says, this sends up a red flag that a house is run down. “If you think a buyer wants to take your four or five thousand dollars to decorate a house that’s been neglected or needs updating, you’re wrong,” says Apligian. “People are always working, and the last thing they want to do when they come home is pick up a paint brush,” he says. Apligian also believes that the reason for this is not just the economy; lifestyles and expectations have changed, and a fresh coat of paint is good, but not enough. “Part of the reason is that you have all these decorating programs on TV,” says Apligian. “People want to walk in and say ‘wow!’ The “wow” factor is very important today.”

If you can’t renovate your entire kitchen, Apligian says, “Granite now costs $25 a foot. Put in a granite counter top, and updated appliances—new stove, oven, microwave, dishwasher. In the bathroom, change the toilet or the vanity.” Grabel says, “almost every listing is extensively landscaped and sellers are paying to have their homes staged if they are not fully furnished or furnished in a certain manner, so it’s less personal, and more of a blank canvas.” “Sellers are doing whatever they can do to put their house in the best light possible, especially in the very competitive price ranges. People are looking for things in pristine condition,” she says. Apligian’s other staging tips: appeal to the senses with soft music, vanilla aroma, the color yellow and natural light.

Less is More

One of the best things to hit the industry, says Apligian, is the pod—a mobile storage unit that is dropped off in front of your house. “You’re moving, right? Let’s start the move now,” Apligian says, “let’s get half the stuff out of your house into a pod. Empty that closet. Get all the crud off the kitchen counter. The toaster oven, the coffee pot. I don’t care if you use it everyday. Get it out,” Apligian says. On the other hand, one of the most sensitive subjects for sellers, Apligian says, is pets. He says that he frequently has to tells his clients nicely, “sorry, but Fido has to go.” “If you have a pet, one out of ten buyers won’t even step foot in your house,” he says. It is much easier to sell a house if your dog can board with friends so there is no smell, noise, or allergy problems. “When you are selling your house, it’s no longer a home, it’s a house. There’s a difference,” he says.

“Wow” House Priced to Sell
In April of this year, Andreas and Keri Wetterwald, decided to sell their three-bedroom, 1700-square foot Tudor, located across from a private lake in White Plains, N.Y. “We were under contract in two weeks,” Andreas Wetterwald said. In the seven years that he and his family lived there, they did approximately $80,000 worth of improvements, including renovating the kitchen, refinishing the hardwood floors, putting in new windows throughout the house and installing a new enclosed patio with French doors. “Three months before we listed the house, we also rented storage units and cleared out a lot of things that were not being used,” adds Keri Wetterwald. “Our house looked bigger and not crowded,” When it came time to put the house on the market, they felt comfortable that their house was in good shape. “We didn’t want to play games,” he says, “we wanted it to sell.” To arrive at the listing price of $579,000, the Wetterwald’s consulted with their realtor. They also did some homework on their own. They found that two houses on their street were also for sale—one priced higher and the other lower. After a couple of low offers, the Wetterwald’s got their asking price. Andreas Wetterwald believes his house sold quickly because of its price and condition. But, he says, there was also that minor detail about the house being across the street from a lake. Isn’t there another rule in real estate, something about location, location, location?

The common perception of Middle America is that of a region insulated from the afflictions of the coasts, but a look at some of the larger Midwestern real estate markets shows that’s not always the case. indeed, some areas fell victim to the same woes that dragged down large markets in New York, Florida, and California, while others are currently experiencing boom-era price increases. Sales are rebounding in the harder-hit markets, but much of that activity has been in distressed properties—foreclosures and short sales. One trend is clear: the $8,000 first-time home buyer tax credit has been a boon to markets throughout the Midwest. And with prices beginning to stabilize, Midwest realtors are cautiously optimistic about the near-term outlook. Here’s a look at some big and small markets.

Chicago

High foreclosure rates, tumbling prices. That’s the Chicago-area real estate market in a nutshell. According to the National Association of Realtors, the media sales price of existing single-family homes in the second quarter fell to $204,300 from $257,600, or 20.7 percent, from the same period in 2008. The first-time home buyer tax credit has sparked six consecutive months of increased unit sales, according to David Hanna, president of the Chicago Association of Realtors. But he points out that much of that activity is in distressed properties, which is putting downward pressure on sales prices overall. No surprise, given that the Chicago area’s foreclosure rate climbed 30 percent in the first half of 2009, according to foreclosure listing service RealtyTrac.
More disturbing, Hanna says, has been the pressure on Chicago’s condominium market, once the strength of the area’s real estate market. The median condo price fell 17 percent in the second quarter. Unit sales dropped 19.1 percent in August, according to the Illinois Association of Realtors. Hanna attributes much of the weakness to regulations Fannie Mae implemented in January to limit risky lending, including raising the pre-sale requirements in condo developments from 51 percent to 70 percent. “[Condos are] entry-level housing in many areas of the city, but in Nevada or South Florida or parts of California, these are second homes, and people are much quicker to walk away from those properties than if they are their primary residence,” Hanna says. “Even though we had a healthy condo market, they made decisions based on national statistics and applied them onto our marketplace. Those were body blows.” Chicago is also known for two-to-four-unit condos. Hanna says changes in Federal Housing Authority guidelines regarding approval of loans for such housing should help bolster the market. Effective Nov. 2, the Federal Housing Administration will allow one unit of two-to-four-unit condos to be eligible for financing. “You’re going to have FHA willing to do loans in two-to-four-unit buildings, which they weren’t doing for most of this year,” Hanna says. “Our neighborhoods are full of these two- to four-unit buildings.”

Minneapolis

Minnesotans tend to be a more fiscally prudent bunch. That’s why it’s so surprising the Minneapolis market experienced the same boom and bust of more high profile markets. “We’ve had a large degree of risky lending practices that were similar to what was going on in the coastal markets,” says Mark Allen, chief executive officer of the Minneapolis Area Association of Realtors. “It’s fairly perplexing to us, because Minnesotans historically have been very conservative in how they spend, invest, and borrow money. Nobody’s been able to come forward with a good explanation as to what created that cultural shift in our market. But it’s clear relative to the data.” The end result: a 12.5-percent drop in second-quarter median sales price for existing single-family homes. On the bright side, inventory is steadily declining. “Last year, as of August 31, there were 31,600 homes for sale,” Allen says. “This year there were 25,500 homes currently on the market.” That’s a decline of 19 percent. But, like Chicago, much of Minneapolis’ sales activity has been in distressed properties and lower-priced homes. “We are confident that we’ve seen the price bottom, but it’s far more established in the lower-end price ranges than in the higher-end price ranges,” Allen says. “Our expectation is that the higher price ranges are going to continue to suffer for at least a year, and possibly two to three years.”

Quad Cities

Thanks to a steady agricultural market, and industrial industries that serve the agricultural market—along with a traditional approach to mortgage lending—the Quad Cities area (a group of four cities in Illinois and Iowa split by the Mississippi River) has been a pillar of strength in the Midwest. Second-quarter prices jumped 30.6 percent from a year ago to a median price of $113,200. “Our marketplace has always been a little bit more conservative when it comes to financing,” says Jon Yocum, chairman of the Quad City Area Realtor Association. “It also has to do with the education we provide our member realtors and making sure our buyers are comfortable with the loan program they applied for.” Although the 30-percent jump is exceptionally steep by Quad Cities standards, much of it can be attributed to an unexpected decline in prices at the end of 2008. “Last fall with the election, you had talk about the economy on every candidate’s agenda,” Yocum says. “They were saying how values had gone down across the nation and it was going to affect every market. It wasn’t uncommon to see offers come in 20 percent below list price. That was because of what people were hearing on the national news, but we didn’t have that effect here. Once the election was over, things started to turn around and get active again.”

Springfield

Illinois’ capital best exemplifies the steady-as-she-goes approach to growth typically associated with the Midwest. “If we had 2- or 3-percent appreciation in a year, we always felt that we were doing good,” says Nancy Long, president of the Capital Area Association of Realtors. “A lot of our people do lending with the local lenders. That’s a big help because they’re a little more conservative than the other lenders, so they haven’t gotten into the financial quagmire that a lot of other people have gotten into.” According to Long, year-to-date home sales through July were down 4.5 percent from a year ago. But activity has recently rebounded with sales for the month of July up 3.8 percent from a year ago. Long also says homes are selling quickly—often after less than 10 days on the market. And foreclosure activity fell 29 percent in the first half of the year, according to RealtyTrac (it helps that Springfield has the second-lowest unemployment rate in the state). And prices are holding up well. Second-quarter median prices climbed 3.5 percent. But for anyone thinking that they’ll get prime property on the cheap, Long says it’s best to look elsewhere. “We’ve got people out there who think because of everything they hear nationally, people come from some of the bigger areas to our area and think they’re going to get a $400,000 or $500,000 for $100,000 or $200,000,” she says. “That’s not happening in our area. Our list-to-sales price ratio is still hovering around 95 percent.”