NAR economist underlines real estate's silver lining By Bernice Ross
Inman News
In all the years I've been writing this column, I have never received such an outpouring of response as I did from the two November articles on how media coverage of negative housing news is hurting our industry.
In spite of gloom and doom of recent news reports on the state of the nation's housing, there is plenty of good news, the most recent of which comes from the National Association of Realtors.
Laurence Yun, the chief economist for NAR, had plenty of positive news for Realtors at last month's conference. Yun attributed much of today's subprime mortgage problem to greed. Wall Street wanted the 10-12 percent return that subprime mortgages yielded as opposed to the smaller returns from more traditional mortgage products. His take on the Wall Street types: "They gambled. They lost."
Yun's outlook for 2008 sees a shift from greedy speculators to serious homeowners. 2008 will be a year of opportunity where there will be serious, healthy business. Furthermore, Yun predicted that the market returns to normal by 2009.
According to Yun, one of the biggest mistakes that reporters make is talking about national trends. Nationally, 2007 was the fifth best year ever on record. Home prices declined about 1.5 percent after a 50 percent run up in prices.
The challenge is that national numbers are pretty much irrelevant. Yun argues that talking about national averages is about as effective as having a national weather forecast. Like the weather, all real estate markets are local. In fact, you may have a buyer's market and a seller's market operating within a single market area based exclusively upon price point. Here are the other key pieces of positive news from Yun's economic report:
1. New housing starts: Even though these are dropping, there was too much building in recent years. The market is simply adjusting to normal supply-and-demand pressures. The inventory is "being controlled which makes stabilization occur more quickly."
2. Foreclosures: According to Yun, the 41 percent increase in foreclosures has resulted primarily from investor-heavy real estate purchases in Arizona, California, Florida and Nevada. The majority of these individuals are flippers whose investments did not payoff. More importantly, the number of foreclosures in Utah, New Mexico, North Carolina and South Carolina is actually declining.
3. Under-priced markets and superstar cities: Although the coastal markets are still overpriced, Middle America is under priced. Nevertheless, Yun cites a new trend termed, "superstar" cities. These cities will command premium prices, regardless of what the market does. There is so much wealth concentrated in these areas, that measurements are simply not predictive. In addition to London, Paris, Tokyo and New York, Yun also identified San Francisco, Miami and Seattle as potential new superstar cities.
4. The recovery has started: Other than the three states hit heavily by job losses in the automotive industry (Indiana, Michigan and Ohio), the states that first experienced a downturn in the Northeast, are now in recovery. Specifically, Connecticut, Massachusetts, New York and Rhode Island were the first to feel the slump and are now well into a recovery. Furthermore, there appears to be a pent-up demand for first-time buyer properties due to a large number of Gen Ys (born 1977 to 1994) that are now buying their first homes. Falling interest rates will motivate many of these buyers to step into the market now.
5. New jobs and corporate profits are still strong: Corporate profits are still strong with companies as diverse as Microsoft and Jack Daniels reporting close to record profits. Furthermore, the economy has generated 4 million net new jobs and wages are rising.
6. A weak dollar may harbinger more foreign investment in U.S. real estate
Although the decline of the U.S. dollar will end up costing us more when we go overseas or purchase imports, it has resulted in more manufacturing jobs returning to the U.S. It also may mean more foreign investment in U.S. properties as well. Just a few years ago, the Canadian dollar was only worth 70 cents in U.S. currency. Today, the Canadian dollar has been hovering at about $1.05 to $1.10 U.S. What this means is that we can expect more Canadians and Europeans to be purchasing U.S. property, because our prices are approximately 50 percent cheaper than they were just three years ago.
7. Real estate: Still the best shelter: For those agents who represent reluctant first-time buyers, Yun points to some interesting research from the Federal Reserve. Between 1995 and 2004, the average renter accumulated $4,000 in wealth. In contrast, the average homeowner accumulated $184,400. Furthermore, the typical homeowner holds their property for six years. Within this period of time, NAR's research shows that approximately 97 percent of the homeowners will have a positive equity position after that period of time.
Bottom line: 2008 represents the best window that buyers will have to find excellent deals with excellent financing. Get the word out there. If they wait, prices and interest rates will be higher and the reluctant buyer may be forced out of the market.
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of "Waging War on Real Estate's Discounters" and "Who's the Best Person to Sell My House?" Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.
This article was borrowed from our friends at Top Producer!
Survey: Borrowers jump at chance to refi below 6%
Inman News
Mortgage application volume rose last week even as interest rates climbed, the Mortgage Bankers Association reported Wednesday.
The group's market composite index, a measure of total home loan application volume, gained 2.5 percent on a seasonally adjusted basis from the end of November, pushed higher by strong refinancing activity.
MBA reported an increase of 4.3 percent in the index that tracks applications for refinancings and a 1.7 percent gain in the purchase-loan index. As a result, the refi share of applications last week rose to 57.6 percent from 56 percent the previous week.
The adjustable-rate mortgage (ARM) share of activity, however, dropped to 9.4 percent from 11.6 percent the week before.
Borrowing costs rose considerably last week as the average contract interest rate on 30-year fixed-rate mortgages jumped to 6.07 percent from 5.82 percent one week earlier, and the average 15-year fixed climbed to 5.72 percent from 5.38 percent. The average rate on one-year ARMs moved from 6.28 percent to 6.31 percent.
Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.17 on the 30-year loans, 1.01 on the 15-year, and 0.97 on one-year ARMs -- compared with 1.07, 1.12 and 0.99, respectively, in the previous week. These points include the origination fee and are based on loan-to-value ratios of 80 percent.
The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
- borrowed by our friends at topproducer.com
Our very own Agent Mr. Joseph Haughey got a certificate of achievement in leadership excellence from the National League of Cities' Leadership Training Institute. They were recognizing the dedication and commitment of Joe Haughey as an esteemed council member. This past year he successfully completed the Bronze Certificate-Leadership Fellow in the certificate of Achievement in Leadership Program. Way to go Joe for going above and beyond to serve our community. We are so proud to say you are apart of our team here at Common Goal Realty.
CONGRATS!!!
Saving money is no easy feat this time of year. But it IS possible. These tips can help you save some green(in more ways than one, since some are also environmentally friendly!).
Alternative Wrap- Get creative to minimize or eliminate pricey wrapping paper without losing he festive touch:
- Adorn a gift with only a ribbon or bow
- Wrap with the sunday funnies
- Make your own wrapping paper using scrap material, glitter, foil -whatever strickes your fancy.
- Let part of the gift act as wrapping - a scarf instead of ribbon, a holiday dishtowel instead of wrapping paper, or an attractive basket, tin ot toe in place of a gift box.
Give from the heartPresents don't have to be costly to be values. giving of yourself is one of the best gifts of all. Consider offering a night of free babysitting to the friend who needs a grown-up night on the town. Give your beloved set of homemade coupons for massages by you. Give your youngster a personal gift certificate for one hour of your full attention and uninterrupted playtime. Of make gifts that play to your own special skills, whether thats baking, making crafts or taking photos.
Fuel up for lessSave gas this season without losing a shopping beat. Just buy online or via mail order. If you need to do shopping in person, plan your route to consolidate trips and minimize destinations. You'll travel fewer miles, use less gas and even same time - another short commodity this time of year!
Thanks for the tips countrywide!
