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This Month in Real Estate
August 2010

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Market Update

Housing activity continues to remain above year-ago levels despite some setbacks resulting from the now-expired tax credit. Improved stability in home prices with similar levels of distressed properties seen last year offers a hopeful sign the market is holding its ground. However, the economy still has a considerable way to go to achieve its full recovery. 

Consumers are saving more and being picky about how they spend their money. While a higher savings rate means less spending in the near term, this is a positive sign that households are taking control of their finances to build some cushion that can be used to pay down debt and/or support future spending.

Existing home sales marked the twelfth consecutive month of year-over-year increase in June. On a monthly basis, sales activity eased 5.1% from May. The moderation in home sales reflects “understandable swings as buyers responded to the tax credits,” according to Lawrence Yun, NAR chief economist. He anticipates such impact to show up in the next two months.

June’s median home price increased for the fourth consecutive month. Distressed homes, accounting for 32% of sales last month, continued holding home prices at highly affordable levels for the time being. While distressed sales hovered around the same level as a year ago, the gain in home prices is pointing to a sustained stability in the making.

Interest Rates

Mortgage rates set a new record low in July as consumer confidence softened and unemployment remained elevated. This presents a great opportunity for buyers and investors. Coupled with lowered home prices and a robust rental market, investors are finding their way to cash-flow opportunities. As recovery gains deeper roots, rates will need to rise to keep inflation in check. 

Rates as of August 6.

This Month's Video

Topics For Home Owners, Buyers & Sellers

Consumers Beware: New Credit Card Tricks

On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, marking a turning point for American consumers and ending the days of unfair rate hikes and hidden fees. While the new law offers significant  safeguards, consumers still need to be vigilant against new practices designed to outflank the new rules.

Stay as informed as possible, read your statement , report any irregularities immediately, and watch for these tricks.

• Shortened Billing Cycle: The CARD Act requires companies to allow a window of at least 21 days from when a statement is mailed and when payment is due. Cardholders are reporting being shortchanged on billing cycle time and then being assessed late-payment fees.
  Advice: Watch out for shortened payment dates.

• Sunday Due Dates: The CARD Act stipulates if a creditor does not receive or accept payments on weekends or holidays, then the date is extended and late-payment fees shouldn’t be triggered. However, some banks say they’re open for business even when there’s no mail delivery.
  Advice: Don’t assume you are safe.

• Low-Limit Cards: The CARD Act says a card’s total annual fees can’t exceed 25% of a borrower’s credit line. However, some issuers may be evading the fee restrictions by charging an up-front processing fee that doesn’t fall under the 25% cap.
  Advice: Watch out for processing and other fees.

• False Inactive Fees: Issuers will no longer be able to charge inactivity fees or extra charges for people who don’t spend a certain amount each year, effective August 22. However, some issuers are charging an annual fee that’s waived if cardholders reach a certain spending threshold.
  Advice: Watch out for conditional annual fees.

• Rebate Offers: Some credit cards offer refunds on finance charges when customers pay on time. However, rebate offers aren’t governed by the CARD Act, and such offers can be revoked suddenly and for any reason, leaving cardholders stuck with higher charges.
  Advice: Rebates may translate to real savings in finance charges.

Source: The Wall Street Journal

Contact me,

your local real estate expert,

for information about what's going on in our area. 

Newsletter Contents

1. Market Update

2. Interest Rates

2. Video

3. Topics for Owners, Buyers & Sellers

Brought to you by KW Research. For additional graphs and details, please see the This Month in Real Estate PowerPoint Report. 

The opinions expressed in This Month in Real Estate are intended to supplement opinions on real estate expressed by local and national media, local real estate agents and other expert sources.  You should not treat any opinion expressed on This Month in Real Estate as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion.  Keller Williams Realty, Inc., does not guarantee and is not responsible for the accuracy or completeness of information, and provides said information without warranties of any kind.  All information presented herein is intended and should be used for educational purposes only.  Nothing herein should be construed as investment advice.  You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.  All investments involve some degree of risk.  Keller Williams Realty, Inc., will not be liable for any loss or damage caused by your reliance on information contained in This Month in Real Estate.

Derek Gutting, The Gutting Group, Keller Williams Realty, www.GuttingGroup.com

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Read below.

Derek Gutting, The Gutting Group, Keller Williams Realty, www.GuttingGroup.com

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After showing signs of a fledgling recovery from the worst downturn in decades, the U.S. housing market appears to be heading back toward the doldrums, as the expiration of a lucrative tax credit for buyers and increased uncertainty about the economy cause home sales to plummet.

This Story

• Housing market's recovery stalls
• Special report: Foreclosure prevention

The sudden weakness in residential real estate has struck nearly every region of the country, according to recent government and industry data, driving down sales of new and previously owned homes alike in May. On Thursday, the National Association of Realtors said an index that measures sales contracts signed on existing homes plunged 30 percent in May, more than twice what analysts had forecast, to the lowest level since the group started tracking the numbers in 2001.

Those sharp declines come despite record-low mortgage rates and historically cheap home prices. The market's renewed fragility highlights concerns about whether the U.S. economy will hurtle back into recession and illustrates the impact of the nation's high unemployment rate, now at 9.7 percent. On Friday, the government will issue jobless figures for June that could signal what is in store for housing and economic growth.

As long as people are without jobs or fear losing their livelihoods, they are unlikely to commit to buying a home and saddling themselves with 30 years of mortgage payments.

"It sounds simplistic but it bears repeating: 'No job = No house,' " Mike Larson, an analyst with Weiss Research, wrote in a note to clients Thursday. "With so many Americans unemployed or underemployed, the housing market is going to keep hurting."

In a report last month, Harvard University's Joint Center for Housing Studies singled out high joblessness as "one of the biggest drags" on the market. Based on past downturns, the report concluded that job growth is highly correlated to a sustained housing recovery, even more so than falling mortgage interest rates.

Many housing analysts are rethinking their predictions for the market's performance for the year. More than half of the 106 economists and analysts surveyed by Macromarkets in June said they expect a dip in home prices; that's up from 40 percent in May.

Despite the flash of pessimism, many economists expect the market to stabilize, but they won't have a clean read on its direction until the fall or winter, when the lingering effects of the tax credit clear the system.

That credit, which expired April 30, heavily distorted normal home sales patterns by enticing people to buy homes earlier than they had planned, thereby eating into future sales, economists said.

"The tax credit was like a Band-Aid over the housing market," said Mark Vitner, a senior economist at Wells Fargo Securities. "Now that the Band-Aid has been ripped off, we've found that the wound has not quite yet healed."

Surprising drops

Home sales were expected to decline once the credit ended, but May's acute drops have surprised many analysts. If the trend continues through the rest of the year, it could upend the market's tepid rebound and undermine the broader economy.

The unsteadiness is further reflected in the fact that the average rate on a 30-year fixed-rate mortgage hit a record low of 4.65 percent this week, but applications for home-purchase mortgages were down for all but one of the past eight weeks, slipping 3.3 percent last week, according to industry data.

Complicating the recovery's prospects is an excess supply of unsold homes on the market, swelled in part by increasing numbers of foreclosed properties for sale. Even though the number of homes on the market is down significantly from its peak, the national inventory of vacant homes for sale or rent remains uncomfortably high at 6.5 million. That's 2 million units more than the market needs, Vitner said.

This Story

• Housing market's recovery stalls
• Special report: Foreclosure prevention

Mark Zandi, chief economist at Moody's Economy.com, said he expects the glut of unsold homes will rise because lenders are starting to sell more foreclosed properties to the public. The number of foreclosures for sale rose 11 percent in the first quarter from the previous quarter -- the first quarterly increase since mid-2008, Zandi said.

Many lenders have come under political pressure to delay foreclosures and modify troubled loans. But as they get a better handle on which loans are unsalvageable, they are starting to complete more foreclosures and put them up for sale, Zandi said.

Government data released last month show that the number of foreclosures completed by the nation's largest national banks and federally regulated thrifts jumped 19 percent in the first quarter from the previous one.

Pulling down values

Once those foreclosures hit the market, however, they sell at steep discounts and pull down the values of surrounding homes. If the share of these distressed sales rise, as many economists predict, prices will suffer.

The recently expired tax break may have diluted the impact of foreclosures by boosting the number of traditional sales, said housing economist Tom Lawler. It also encouraged anxious buyers to bid up prices so they could make their purchase before the tax credit program ended, he said.

The tax credit offered up to $8,000 to some first-time buyers and $6,500 for certain repeat buyers. To qualify, buyers had to sign a contract by April 30 and close by June 30. But lenders and real estate agents reported widespread delays in processing a crush of mortgage applications in time for the June deadline. The Realtors group estimates that as many as 180,000 could miss out on the credit as a result of the backlog.

To keep the momentum going, Congress week voted this week to extend the closing date on the tax credit to Sept. 30. President Obama is expected to sign the measure Friday morning.

With the government's incentives for buyers gone by early fall and a cloudy employment picture, economists seem more keenly aware of the fragile nature of the housing sector's health.

"We're kind of sitting here in low tide," said Stuart Hoffman, chief economist at PNC Financial. "We're not sure if the tide is coming in and we're about to drown, or if it's moving out and we'll be left standing there dry as a bone."

http://articles.moneycentral.msn.com/RetirementandWills/RetireInStyle/weston-5-cheap-places-to-retire-in-the-us.aspx

Derek Gutting, The Gutting Group, Keller Williams Realty, www.GuttingGroup.com

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