T Mi Re Feb 2010 Us Edition


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February Edition of This Month in Real Estate National and Local News

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T Mi Re Feb 2010 Us Edition

  1. 1. Commentary 2 Released: The Numbers That Drive Real Estate 3 February 5, 2010 Recent Government Action 9 Topics for Buyers and Sellers 15 Brought to you by: KW Research
  2. 2. Commentary January began the new decade with indications that the economy is beginning to gain traction. Real GDP grew by 2.2 percent in the third quarter of 2009 and preliminary signals point to a continued positive trend for the following quarter. GDP is a measure of total economic growth for the country in a year. A dip in home sales in December was due in large part to timing. First time buyers that would have liked to close in December but qualified for the tax credit bumped their timeline up in order to cash in. News of the credit’s extension reached many of them after their plans to close in December were set. Interest rates are back below 5% and home prices are up compared to last year. The government continues to attempt to minimize the impact of troubled homeowners by continuing to improve its foreclosure prevention program and has also taken steps to help foreclosure buyers purchase faster. Although the unemployment rate is expected to stay high as jobs increase modestly, experts expect the economy to continue to grow in 2010. KW Research 2
  3. 3. Home Sales 4 The Numbers That Home Price 5 Inventory 6 Drive Real Estate Mortgage Rates 7 Affordability 8 Brought to you by: KW Research
  4. 4. Home Sales In Millions After a rising surge for three straight months, existing home sales slowed in December after first-time buyers rushed to meet the original November tax credit deadline and evidenced by first timers accounting for 51% of sales in November compared to 43% in December. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, NAR chief economist. December sales of 5.45 million remain 15 percent above the 4.74 million-unit level last year. Seasonally Adjusted Home Sales Latest Data Release: January 25, 2010 Source: National Association of Realtors KW Research 4
  5. 5. Median Home Price In Thousands Existing-home price was $178,300 in December, 1.5 percent higher than December 2008 and 8.2 percent above its low in January 2009. It was the first year-over-year gain in median price since August 2007, attributable to an increase in the number of mid- to upper-priced homes in the sales. Latest Data Release: January 25, 2010 Source: National Association of Realtors KW Research 5
  6. 6. Inventory - Number of homes available for sale In Millions The supply of homes continued to shrink, falling 6.6 percent to 3.29 million, representing a 7.2-month supply at the current sales pace. Compared to a year ago, there are now 11 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006. Number of Homes Available for Sale - In Millions 11% decline from last year Latest Data Release: January 25, 2010 Source: National Association of Realtors KW Research 6
  7. 7. Mortgage Rates 30-Year Fixed Mortgage rates have moved back to less than 5 percent, which have been categorized by industry experts like Freddie Mac chief economist Frank Nothaft as “near a record low.” This move that may help boost home loan demand and lend support to the housing market recovery. On January 28, the average 30-year fixed-rate mortgage was 4.98 percent. 2009 Average 5.04% Average Weekly Mortgage Rates Source: Freddie Mac KW Research 7
  8. 8. The percentage of a median family’s income required Affordability - to make mortgage payments on a median-priced Percentage of Income home Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent. Historical Average: 25% Well below the historical standard of 25% Affordability as of December every year. Calculations assume a 20% down payment. Source: National Association of Realtors KW Research 8
  9. 9. Recent FHA Tightens Requirements Paperwork Streamlined for Mods 10 12 Government Action FHA Helps Foreclosures Sell Fast Small Business Lending Proposal 13 14 Brought to you by: KW Research
  10. 10. FHA Tightens Lending Requirements The Federal Housing Administration (FHA) insured almost 30 percent of all purchase loans and 20 percent of refinances from September 2008 to September 2009, up from about only 2 percent of all loans three years earlier. The influx of loans combined with falling capital reserves, which cushion against rising defaults, has led the FHA to announce several measures to strengthen its economic vitality. On January 20, the FHA announced it will do the following: 1. Raise Insurance Fees - In exchange for FHA backing, borrowers pay an up-front premium. Previously it was 1.75% of their loan. It’s now risen to 2.25%. Sales price of: $200,000 x 1.75% = $3,500 $1,000 additional Sales price of: $200,000 x 2.25% = $4,500 2. Cap Seller Contribution to Buyer’s Closing Costs - Sellers can contribute a maximum of 3%, down from 6%, of the sales price to the buyer’s closing costs. The higher cap created risk by incentivizing homes to sell at a substantially marked-up price to compensate for contribution. 3% is still a significant proportion to closing costs. Sales price of: $200,000 x 3% = $6,000 in closing costs 3. Require Higher Down Payments for Poor Credit - Beginning this summer, borrowers with a credit score below 580 will need to make a down payment of at least 10%. The FHA will still provide a viable alternative to the 1% of FHA borrowers who fall in this category, whereas most lenders’ credit score cutoff is 620. Sources: The Wall Street Journal, Keller Williams Realty Research First-Time Buyer Survey KW Research 10
  11. 11. FHA Tightens Lending Requirements These changes will likely have the biggest impact on first-time buyers. First-Timers are about half of all buyers in the market right now. According to a Keller Williams Realty Research study, 73% of first time buyers put down less 3.5% or less. 3.5% is the minimum down payment for financing to be backed by the FHA. Concerns have been expressed about how these changes will happen alongside two other noteworthy changes this spring: 1. The expiration of the home buyer tax credit 2. The end of the Federal Reserve’s purchase of mortgage-backed securities (which has helped keep rates low over the past year) The good news is the FHA, an integral player in the market, has stepped up to protect itself so it can continue helping first-time buyers, those with less cash for a down payment, and those with less-than-perfect credit obtain home loans. Additionally, these proactive measures aim to protect the agency from needing taxpayer funds from the government. Sources: The Wall Street Journal, Keller Williams Realty Research First-Time Buyer Survey KW Research 11
  12. 12. Paperwork Streamlined for Modifications During 2009, 900,000 troubled homeowners began trial loan modifications under Obama’s Making Home Affordable program. However less than 67,000 went from the trial phase to a permanent modification. One of the main culprits for borrowers not qualifying for the permanent modification is paperwork. In an effort to streamline paperwork, the Treasury released the following simplified paperwork requirements: 1. A form requesting a modification 2. Authorization for the bank to obtain tax information from the IRS 3. Proof of income, i.e. two recent paystubs Beginning June 1, lenders must collect the paperwork before beginning the trial modification period. These changes are aimed at increasing the number of people who can avoid foreclosure and stay in their home. Short sales can provide an alternative for those who don’t qualify. As the number of defaults and foreclosures slow, home prices are expected to stabilize and normalize the market. Source: The Wall Street Journal KW Research 12
  13. 13. FHA to Help New Foreclosures Sell Fast FHA has announced it will lift the 90-day seasoning requirement for one year. The FHA ‘s 90- day “seasoning” provision requires that a home sold to an FHA buyer must be owned for at least 90 days by the seller before closing. This is intended to prevent buyers from purchasing property from “flippers” at an overly inflated value. In the current climate, quickly selling foreclosures has risen in importance while the prominence of “flippers” has dramatically decreased. Acquiring, rehabbing, and reselling a foreclosure often takes fewer than 90 days. Banks have been reluctant to sell foreclosures to FHA buyers if they would need to push closing back to meet the FHA requirement. The policy change will allow FHA buyers to purchase HUD-owned and bank-owned properties along with private sales faster. There are additional stipulations; for more, please visit the press release. Quickly moving foreclosures out of the bank’s hands and into those of home buyers is an important step in stabilizing home prices, neighborhoods, and communities leading toward a healthy housing market. Source: U.S. Department of Housing and Urban Development KW Research 13
  14. 14. Obama proposes $30B for Small Business Loans $8B (2%) decrease in Small businesses are a major driving force of the economy. More than 95 small business lending from percent of businesses in the United States have less than 500 September 2008 to September 2009. employees. They tend to have less capital “cushion,” which can make it more difficult to weather a recession. However, the number of small businesses generally is not significantly impacted by recessions.* Unemployed workers turn to entrepreneurship as an alternative, driving innovation and growth. Available funds are a critical part of this by helping existing businesses to bridge the gap and start-ups to grow and expand. President Obama announced plans to create jobs through aiding small business during the State of the Union Address. The first steps in this direction have been announced but will need Congressional approval. The initiative would open up $30 billion of the federal money for community banks who commit to increasing small business lending. Participating banks would pay the government a 5%-1% dividend on the capital they receive depending on the level of lending. Others have discussed the possibility of having the Small Business Administration lend directly rather than going through community banks. Supporting small business will be an important component to lowering *In the 1990-1992 recession, 1,068,124 small businesses were closed. 1,085,737 were created. unemployment and an overall firmer economy, but the method is up for A net of more than 17,000 jobs were gained. In discussion. Look for continued discussion of small business lending and steps 2001, more businesses were closed than opened, but in the following two years, there was a net toward improving it this year. gain nearly 55,000 small businesses. Sources: The Washington Post, U.S. News & World Report KW Research 14
  15. 15. Topics for Home Pricing Research 16 Buyers, Sellers, and Staging Stats 17 Owners Brought to you by: KW Research
  16. 16. Pricing Research Here is a sneak peek at conclusions from KW Research’s most recent Home Seller’s Survey. The full report will be available in March. Price it right. • Sellers who listed their home at the price originally recommended by their agent sold it: − 38 days faster o This would save a mortgage payment and taxes and insurance, for example: For a $200,000 home with a 20% down payment and 6.5% interest rate, the principal and interest alone would be $1,101* − For 2.25% higher o 2.25% of $200,000 is $4,500* − With 1 less price reduction o The average price reduction was $11,042. * Averages based on national survey data. Actual dollar amounts are for example only. Source: Keller Williams Realty Research Getting the Home Sold KW Research 16
  17. 17. Staging Stats Staging can be an important component, not only in selling a home but also in attracting buyers to tour it in person. Even with all of the commonly accepted advantages of staging, Top reasons for only about 1 in 3 sellers stage their home. not staging include the Pictures of the home, that are then posted online and viewed following: Seller by potential buyers, often look their best if the home has been staged. did not believe was necessary, or The National Association of Realtors 2009 Profile of Home Buyers and Sellers he/she didn’t found that, as a result of viewing a home online: • 77% of buyers drove by or viewed the home want to incur • 61% walked though the home costs. • 22% requested more information The Keller Williams Realty Research Getting The Home Sold study found it typically took between 2-6 hours to stage a home and cost an average of $523, including the cost of a staging professional and items purchased or rented. The average increase in list-to-sell in staged homes: 1.08% The average cost of staging: $523 Potential benefit based on a $200,000 home: $2,160 -523 = $1,637 The study found staged homes had more showings and a higher list-to-sell percentage than those that were not staged. Staging had advantages at all price points, but the finding showed that staging is particularly important for homes over $600,000. Source: Keller Williams Realty Research Getting The Home Sold KW Research 17
  18. 18. Your Local Market Although it is important to stay informed about what is going on in the national economy and housing market, many different factors impact the real estate market in your area. Talk to your Keller Williams agent for assistance interpreting the conditions in your local market. Keller Williams associates are equipped with all the knowledge and information to help you navigate through the process of buying or selling a home in this challenging market. KW Research 18
  19. 19. About Keller Williams Realty Founded in 1983, Keller Williams Realty, Inc., is an international real estate company with more than 74,175 associates and 693 offices located across the United States and Canada. The company began franchising in 1991, and following years of phenomenal growth and success, became the third-largest U.S. residential real estate firm in 2009. The company has succeeded by treating its associates as partners and shares its knowledge, policy control, and company profits on a system-wide basis. Focusing on helping associates realize their fullest potential, Keller Williams Realty is known as an industry leader in its family culture, unmatched education, profit sharing business model, phenomenal coaching program, and technology offerings. The company provides associates with all the tools needed to grow and thrive in today’s market. www.kw.com KW Research 19
  20. 20. About Paul W. Drury • Originally licensed as an agent in Ohio in 1986, Paul began with Lehman Johnson Real Estate in Elyria. He acquired his Real Estate Brokerage License in 1992 and became an Associate broker with West Shore Realty. In 1995 he moved his brokerage license to Continental Realty Investment where he began to focus on additional work with commercial and investment real estate. During these years he also performed professional appraisals with The Appraisal House. • In 2001 he began Drury Realty Consulting and worked as an independent Real Estate Consultant and worked on his own until 2009 when he joined Keller Williams Realty, Greater Cleveland West. “Being a part of the Keller family provides me with tools and serves unachievable strictly on my own, provides me with the tools and networking of a huge national network, while still enabling me to work, act, and function as the manager of my own business. It’s the best of both worlds.” – Paul • Paul's Home Page KW Research 20
  21. 21. What we have to offer sellers • Sellers now have access to tools unimaginable just a few years earlier. Keller Williams Realty doesn’t spend valuable resources promoting its own name. Instead it puts resources into the best tools and resources for education and training, providing the highest quality real estate professionals into local communities. • Properties put up for sale by Paul are also listed in KWLS, a national MLS, implemented by Keller Williams the third largest company in the US; local MLS; NEOHREX (Northern Ohio Real Estate Exchange); and on national sites such as Trulia, Zillow, CyberHomes, and others. KW Research 21
  22. 22. What we have to offer sellers ( Cont’d) • Other tools brought to bear by Paul include branding using unique web addresses with a virtual tour that can be emailed or the link can posted anywhere, to include Craig’s List and Back Page. Examples of properties sold recently using this method include: – 947 Gulf Road in Elyria (sold in 28 days) http://947gulfroad.com/ – 359 Gayle Drive in Sheffield Lake (sold in 57 days) http://359gayledrive.com/ – 327 Gayle Drive in Sheffield Lake (sold in 18 days) http://327gayledr.com/ – 810 Sandalwood Drive in Elyria (Sold in 19 days) http://810sandalwooddr.com/ • Not Planning to sell in the near future? – Would you still like to monitor what is happening in your neighborhood or area? – Contact Paul now for a free periodic market update. No cost. No obligation. KW Research 22
  23. 23. Properties currently for sale • Properties currently for sale: – 37101 Hunters Trail in Avon - http://37101hunterstrail.com/ – 4435 Porter Road in North Olmsted - http://4435porterroad.com/ – 19593 Whitehead Road in Wellington - http://19593whiteheadrd.com/ – 1 Grover Court in Grafton – http://1groverct.com – 416 Winckles Street in Elyria – http://416wincklesst.com – 149 Woodview Drive in Elyria – http://149woodviewdr.com • Would you like to see one of these homes? Click on the link for a tour. • Would you like your home or property promoted like these? – Contact Paul for a free, no obligation, consultation today at 440-385-5650. KW Research 23
  24. 24. What we have to offer buyers • Buyers of Real Estate also have access to tools unimaginable just a few years before. Since Keller Williams doesn’t spend its money promoting its own name, it puts its resources into providing the best tools and resources to its systems, education, and training, thus providing the most professional real estate team members back into the communities. • Paul is available most hours of the day directly without having to speak with assistants and he monitors his email regularly. KW Research 24
  25. 25. What we have to offer buyers (Cont’d) • Buyers can access Paul’s website at www.druryrealty.com and conduct their own searches as well as create their own search profiles for searching for properties anywhere in Ohio. If relocating out of Ohio, Keller Williams offers one of the finest relocation referral networks in the nation. While we may not be the biggest firm in Northern Ohio yet, we are in many areas of the national already. • Paul’s website is easy to manage and he can set up search profiles for you so you get notified at about 8:30 am of any new properties that come available. He also has profiles set up on national websites such as Trulia providing for greater access to search tools. KW Research 25
  26. 26. Investors & Shoppers – Foreclosure Watch • Are you shopping for the deal of a century for your new home? • Are you in the market to buy a home at a steep discount and try and fix it up and “flip it”? • Are you looking for a home for someone else? • Want to know what is happening in your marketplace? • Send Paul an email today and request free market updates at paul@druryrealty.com • Call Paul directly at 440-385-5650. • No cost. No commitments. No obligations. No fuss. No kidding. KW Research 26
  27. 27. Follow Paul on line… Home Web Page On Twitter • www.druryrealty.com • - www.twitter.com/PaulWDrury On Zillow On FaceBook • www.zillow.com/profile/PaulWDrury • - www.facebook.com/paul.w.drury On Trulia On LinkedIn • www.linkedin.com/in/paulwdrury • www.trulia.com/profile/paulwdrury On the Real Estate Global Network • www.realestateglobalnetwork.com/profile/PaulWDr ury KW Research 27