Comments on: Second Chance for First-Time Buyers

By: Carmen Arruda

Carmen Arruda — Sun, 04 Apr 2010 22:43:08 +0000

For the fourth consecutive month, housing prices fell slightly, dipping 0.4% from December on a non-seasonally adjusted basis, according to the Standard & Poor's/Case-Shiller home price index, which tracks 20 large cities. Values dropped in 18 of 20 metro areas, with only Los Angeles and San Diego posting modest gains.

From May to September, home prices rose 5.3% on the stock market rally and pent-up demand. But the run-up stalled as a first-time home buyers' tax credit expired in November and foreclosures bloated housing stocks.

"I think we've moved from a rebound phase to a if-we-hang-on-everything-will-get-to-where-we-belong phase," says David Blitzer, who oversees the survey for Standard & Poor's.

The good news: The stomach-churning real estate crash seems to be history, and the market has stabilized. Prices are down only about 1% since September and 0.7% vs. January 2009, the best year-over-year showing since January 2007. Yet values are still nearly 30% below their summer 2006 peak. Prices in Charlotte, Las Vegas, Seattle and Tampa notched new lows in January.

Seasonally adjusted prices rose 0.3%, the eighth straight increase, though they, too, have been basically treading water since fall.

Big backlogs are preventing a more robust upturn. There was an 8.6-month supply of existing homes in February, up from 7.8 months in January, according to the National Association of Realtors. That's lower than the 11-month buildup during the nadir of the real estate downturn in July 2008, but a healthy supply is six months.

Most of the foreclosures are hitting the market in the first quarter, economist Patrick Newport of IHS Global Insight says. They'll be partly offset by a second home buyers' tax credit that should modestly goose spring sales, he says. Buyers must sign a contract by April 30 and close by June 30. Still, he says, its expiration, combined with the foreclosures, should push down prices 5% by year's end.

Joel Naroff of Naroff Economic Advisors is a bit more sanguine. He says the tax credit, and the improving economy and job market, should result in a 1% to 3% increase in home prices this year.

Meanwhile, a closely watched index of consumer confidence beat expectations, jumping to 52.5 in March after falling sharply to 46.4 in February on concerns over nearly 10% unemployment, The Conference Board said. The portion of consumers saying jobs are hard to get fell to 45.8% from 47.3%, while those who say jobs are plentiful rose to 4.4% from 4%. The overall index is up from its low of 25.3 in February 2009 but well below normal.
Carmen Arruda, Fidelity National Title

By: D.C. Area Condo Sales Up 34 Percent! - Housing Complex - Washington City Paper

D.C. Area Condo Sales Up 34 Percent! - Housing Complex - Washington City Paper — Mon, 11 Jan 2010 15:38:05 +0000

[...] to add to the supply in the last year or so. (Though, it’s starting to pick up!) Plus, the 2009 homebuyer credit, which expired in late November, was targeted entirely to first-time buyers in relatively low income brackets–for example, [...]

By: Existing Home Sales Jump 7.4 Percent in November - Housing Complex - Washington City Paper

Tue, 22 Dec 2009 16:30:59 +0000

[...] April 30 to use the second credit, creating another likely surge this Spring. (Read more about the tax credit—and tips for using it—here.) Yun says these upticks stabilize “the housing sector with inventories continuing to [...]

By: Home Sales Way Up in D.C. in November - Housing Complex - Washington City Paper

Home Sales Way Up in D.C. in November - Housing Complex - Washington City Paper — Mon, 14 Dec 2009 21:47:36 +0000

[...] The Washington Business Journal is reporting that counties and jurisdictions across the D.C. region are reporting strong sales numbers from last month, the last possible time that buyers could utilize the old first-time homebuyer credit. [...]

By: The Extended, Extended Homebuyer Tax Credit… - Housing Complex - Washington City Paper

Wed, 25 Nov 2009 20:34:29 +0000

[...] actually reminded me of something that’s rarely mentioned when it comes to stories about the credit, a huge driving force in today’s housing market: “Members of the Armed Forces and [...]

By: Existing Home Sales Up 10 Percent in October - Housing Complex - Washington City Paper

Mon, 23 Nov 2009 20:04:59 +0000

[...] credit—as we’ve reported about extensively—was extended earlier this month. The ten percent jump is higher than analysts expected, but [...]

By: Carmen Arruda

Carmen Arruda — Thu, 19 Nov 2009 00:48:34 +0000

Carmen Arruda’s thoughts on foreclosures and the current real estate market:
The number of people interested in investing in real estate has doubled since March as more folks are lured by low prices and the wide selection of foreclosures that can be bought on the cheap, according to survey results released this week by Move.com.
Just more than 12% of potential home buyers surveyed plan to purchase a home as an investment property compared with less than 6% who said the same seven months ago, the survey found. Of those interested in buying a foreclosure, 42% were investors. About 13% of those investors would turn their foreclosures into rentals, 11% would fix them up for resale and 17% said the houses would be used by a family member until the home could be sold for a profit, according to the survey.
Of all potential buyers interested in purchasing a home -- both for investment and to live in -- 25% said they want to buy a foreclosure.
They also plan on buying low and watching their purchase pay off in the next several years. Of the potential buyers polled, 58% said they expect to pay at least 20% less than market price for a foreclosure, and 39% said they expected a 25% or greater discount. Seventy-three percent expect their properties to appreciate 10% or more in five years; 28% expect their purchases to appreciate 20% or more during the same time.
The most popular reasons given for taking action now: concern that prices have hit a bottom and a desire to take advantage of bargains, according to the results.
About 1,000 people participated in the survey.
"This latest survey validates what many had hoped to see in the housing markets -- affordable prices and ample inventories are restoring the appeal of real estate to investors while providing opportunities for first-time home buyers to enter the market,"
"In today's environment, regardless of whether you're an investor or interested in purchasing a home to live in yourself, residential real estate is a more attractive investment today for many than it has been in recent years."
Members of the National Association of Realtors will likely be expressing similar sentiments when they meet this weekend for their annual conference.
With the first-time home-buyer tax credit extended last week -- and expanded to benefit certain move-up buyers too -- this could be an unusually busy winter for home sales. Throw increased investor interest in the mix, and its possible Realtors could have the happiest holidays they've had in a while.
Buying forelcosures:
Buying foreclosures can be extremely profitable for real estate investors. It means that you need to be aware of local laws and how they may affect the ownership of a property. Buying below market value with no money down is easy, you just need to know how to do it. You can usually purchase a foreclosure for no more than 75% of retail price.

Homeowners usually face foreclosure on their properties for failing to pay their mortgage payments.Because the homeowner has been delinquent their mortgage, they are now in a position to entertain offers by investors. Depending on your state, the lender will issue this notice when the homeowner has been 3 months delinquent on the mortgage payments. In order to buy during this period, you first have to make a deal with the homeowner. Buying a pre-foreclosure means dealing and working out an agreement with a homeowner, attempting to buy the property from them before it has been foreclosed on.

By: A Few More Tips for First-Time Homebuyers - Housing Complex - Washington City Paper

Wed, 18 Nov 2009 23:32:53 +0000

[...] last week’s column, I wrote about the first-time homebuyer credit and provided some tips for people interested in taking advantage of the “free money,” [...]

By: Is the Tax Credit Turning D.C. Into a Seller’s Market? - Housing Complex - Washington City Paper

Mon, 16 Nov 2009 18:15:54 +0000

[...] about the first-time homebuyer tax credit recently, and last week, even devoted an entire column to the subject. My feeling is, it’s out there—I might as well inform people how to take advantage. I [...]

By: Carmen Arruda

Carmen Arruda — Thu, 12 Nov 2009 21:55:27 +0000

Check out this story about the extension of the housing tax credit:

http://abclocal.go.com/wabc/story?section=news/politics&id=7087955

If you want to skip it, here's the interesting part (which they do not explain in detail):

1,400,000 homebuyers have taken advantage of the tax credit.

The story specifically states that NAR estimates that 350,000 of those wouldn't have purchased without the tax credit, meaning 1,050,000 would still have purchased without the tax credit.

This means the total cost of the program breaks down like this:

1,400,000 x 8,000 = $11,200,000,000 (11.2 BILLION)

This means the total cost to give the 350,000 people who wouldn't have purchased a home without the tax credit was the 11.2 Billion; which means:

11,200,000,000 / 350,000 = $32,000 per transaction

So:

It cost $32,000 for each individual who got the $8,000 tax credit, to motivate them to purchase a new home.

Wow.