Bidding Wars; Legacy of the housing bubble that won’t go away

Bidding warsThe housing bubble brought bidding wars — wars over $500,000 properties that ultimately sold for $600,000, wars over under-listed condos that drew dozens of would-be buyers, wars over starter homes that a few years earlier would have fetched a fraction of the price. This manic bidding was, in effect, a sign of the bubble, as well as a factor that helped inflate it.

But a curious thing has happened since the housing market has returned to something more rational: The bidding wars haven’t gone away.

A practice that was rare in the 1980s and 1990s now seems here to stay in markets like Washington, D.C., a permanent gift of the housing bubble (if you want to look at it that way). Lu Han and William Strange, economists at the University of Toronto’s Rotman School of Management, have concluded as much after looking at data from the National Association of Realtors dating back to the 1980s.

They find, in research published in the journal Real Estate Economics, that only around 3 to 4 percent of homes on the market across the country were selling in bidding wars for years prior to the bubble. Then at the bubble’s peak, nearly 30 percent of homes in metropolitan D.C. were selling this way, the highest share of any metro Han and Strange studied. The same was true of about 22 percent of home sales in Baltimore and Norfolk, 23 percent in Las Vegas and 26 percent in Los Angeles.

Since the housing collapse, these crazy numbers have declined, but not back to their earlier levels. As prices have fallen and the number of home sales has, too, bidding wars haven’t disappeared apace. That means that we’re probably seeing not just a lingering effect of the housing bubble, or even a pure product of high housing demand, but a new strategy for selling homes that was embraced during the bubble.

“The persistence of this suggests that people have decided that this is a good way to think about selling these kinds of goods,” Strange says, “selling housing in a more auction-like way.”

If a list price once meant the seller’s ceiling, for many homes it’s now the buyer’s floor — the number with which the auction can begin. Part of what’s going on here, Strange says, isn’t just that the small supply of homes for sale continues to push up their price in certain markets like D.C. (bidding wars still made up about 12 percent of sales here as of 2010). Real estate agents are also strategically listing homes below their value to createbidding wars.

“One way to see all of this is that housing is this incredibly important good, it’s easily the most important asset in a typical household’s portfolio. As a share of total wealth, housing is huge,” Strange says. “And yet, the way houses are getting marketed, very broadly speaking nowadays, is an awful lot like it was 50 years ago.”

If you’re a buyer or a seller, you sign a contract with a real-estate agent who understands what’s going on a lot better than you do. They negotiate on your behalf and split a commission, typically about 6 percent. The way information is traded — through home visits, negotiations and market comparisons — is more or less how it’s been done for decades. For most of this time, buyers would set an aspirational price, then negotiate down from there.

“With the rise of bidding wars, we shouldn’t think that the housing market — like other markets — is just going to keep doing things in the old traditional ways forever and ever,” Strange says. “There are going to be changes.”

Australians have long bought housing like Americans buy high-end art — at auction. So what’s to say more of us won’t buy housing like that in the U.S. too?

Whether or not that tactic is actually making sellers more money — it’s hard to know in this data — some agents must believe that it does. The result for the rest of us is that an opaque market becomes even more so. You may think a $300,000 home is in your budget, only to find that the sellers never intended to accept that little anyway. You may struggle to gauge the difference between a $400,000 home and a $500,000 one because you can’t tell which one — or both? — is intentionally under-listed.

Now add to the confusion of buying a home the sometimes irrational emotional of an auction. Other research suggests, for instance, that some people online are willing to pay more at auction than they will for the exact same item on a one-click purchase. It’s hard to believe similar behavior doesn’t seep into housing auctions as well.

“People are making these million-dollar trades,” Strange says of homebuyers. “But we really don’t know that much about the housing market, where it’s going, what demand and supply are. It’s an amateur market where people are making these huge, huge decisions.”

At the very least, here is a free piece of information for your frantic search if you’re buying a first home to haven’t bought a new one in 15 years: Bidding wars are now a thing.

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6 Things Sellers need to know before they list FOR SALE

sellers-need-to-know
The information contains an agent perspective, but nonetheless it’s good content for all those folks looking to sell in 2014.

In a market where home inventory is low and demand is soaring, your sellers may think that their home will move in mere minutes–and at a price that defies even the loftiest expectations. When left untethered, these dreams of big prices and warp speed sales can spell disaster–and major disappointment–for you and your clients.

Don’t worry! You’re not doomed to this fate. With a few smart, premeditated steps you can head-off seller miseducation and common misconceptions and start your client on the path to a successful sale from the get-go. Here are six scripts and simple talking points that your sellers need to know before their home hits the market.

 

1. Staging matters–big time!

Every agent knows the old adage, “Homes that don’t show well don’t close well.” But still, time and time again we see sellers rail against the time and cost associated with staging a home. Afterall, if they love their home as it is, why shouldn’t everyone else? This is a situation where sometimes showing trumps telling. If you have a particularly stageing-averse client, take them on a two-home showing; one where the home is staged and one where the home is not.

Be sensitive, but firm. Their decor may be a beautiful expression of their personality, but sometimes less is more. You can also download and share Trulia’s 10 Hardcore Staging Tips for Sellers so that they can reference it before every open house.

2. The market sets the price, not the owner. 

It’s understandable that many home sellers think that their home is above the price that the market dictates. Sentimental value often translates into an inflated sense of the home’s worth,  but when it comes price, the winning opinion is always the market’s opinion. You know it’s impossible to effectively price a home without taking into account the competition. Unfortunately, too many sellers don’t.

First, it’s essential to determine how much the seller thinks their home is worth. If their expectation is wildly inappropriate, it may be worth taking the clients to see a home that is on the market and priced at their expectation. Then, take the seller to a comparable home that is priced similarly to where you feel their home should be priced. Take the time to both educate them on the competition and give them expert home pricing tips to help them understand your pricing strategy.

Need more resources:

  • Download and share Trulia’s home pricing tips handout
  • Send the seller their Trulia home estimate report, which uses market data to create a customize report.

3. Small renovations may mean big bucks later

In many cases, the cost of a home repair is less expensive than a potential buyer perceives the cost of the repair to be. If buyers over estimate the cost of fixing the problem, it may negatively impact the offer amount and end up costing the seller more in the long run. Be upfront with your seller clients when you spot unsightly blemishes that could cost your clients the deal.

Before you list and start marketing the property, counsel your sellers on the improvements you know will make a difference when it comes to price. If you need a starter list of simple ways to boost a home’s value and its showing potential, download our guide on the 10 ways to boost your home’s value.

4. Incentives can help close the deal faster.

Offering practical incentives might not sound sexy, but those that fill legitimate buyer needs have the power to differentiate a listing from the competition and attract just the right attention needed to get the home sold for the right price.

Talk to your sellers early about how they might be prepared to sweeten the deal if the right offers don’t come rolling in. Talking incentives early and building them into the marketing plan can arm both agent and seller with the ammunition to jump potential marketing hurdles and beat out the competition for a fast sale.

If you need help deciding what incentives help sell homes check out this popular home seller handout on the Top 4 Incentives that Sell Homes.

5. Serious buyers never stop the hunt.

Too many sellers see the winter months as the slow season. The reality is, there are plenty of upsides to listing and marketing a home when everyone else is taking a break.

Check out and share our free agent download 5 Unexpected Upsides to Off-Season House Hunting to show your clients that holding off on listing could ultimately make selling harder than it has to be.

6. Real estate is a local business.

The last few years have turned real estate headlines into high-profile news. Home prices are on the rise. In fact, last month home prices were up 11.9% over the year past. While this is great news for the country as a whole, be sure to remind your sellers that real estate is a local industry and that asking price isn’t everything.

To do this, consider posting your own local market updates on your personal real estate blog. In addition, check out and use these tips for showing your clients the difference between asking and listing price in your local market. For many sellers, seeing the numbers is just the ammo they need to agree to the right price.

Shift in California Home Sales

Investors are playing a smaller role in the California housing market as the number of distressed properties shrink, according to new data from the California Association of Realtors.

Distressed property sales dropped to 17.1 percent of sales in July, compared to 20.1 percent in June and 40.8 percent in July 2012, the association reported.
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“The increase in the share of equity sales reflects a market that is fully transitioning from investor purchases of distressed homes to primary home purchases by households,” C.A.R. chief economist Leslie Appleton-Young said in the report. “The market continues to improve as more previously underwater homes gain equity due to recent upward movement in prices.”

Equity sales – or non-distressed property sales – accounted for 82.9 percent of sales, the highest share since December 2007. The share of equity sales has risen on a month-to- month basis for 17 of the last 18 months, CAR reports.

The number of short sales fell to the lowest point since April 2009 at 11.6 percent, down from 12.9 percent in June and 22.7 percent of all sales a year earlier.

“The continuing decline in short sales indicates more previously underwater homes are moving into positive equity as home prices remain on an upward trend,” the report says.

The median price of a single family home in California is up more than 30 percent in the last year, in part due to a tight supply of homes for sale. Inventory is still “tight” the association reports, with the “Unsold Inventory Index” essentially unchanged in the last month.

Pending home sales were also flat in July, with CAR’s Pending Home Sales Index dropping 0.2 percent in July to 114, down from 114.3 in June, based on signed contracts. Pending sales were down 1.5 percent from the 115.8 index recorded in July 2012. – See more at: http://www.worldpropertychannel.com/north-america-residential-news/california-home-sales-equity-sales-investor-sales-distressed-property-short-sales-california-association-of-realtors-7255.php#sthash.ifDNUUEW.dpuf

Southern California Home Sales Hit 7-year High

rising home pricesBuyers poured a record $4.65 billion in cash into Southern California’s housing market during May, driving the biggest price gain in nine years and putting sales at a seven-year high, a research firm said Tuesday. 

Last month, cash down payments and home purchases jumped 19.5 percent from $3.89 billion the year before and increased 1.8 percent from $4.57 million in April, the prior record, said La Jolla-based DataQuick.

The median price paid for all new and resale houses and condos in the six-county region increased 24.7 percent in May to $368,000 from $295,000 a year earlier and it was up 3.1 percent from $357,000 in April. 

Last month’s median was the highest for any month since May 2008, when it was $370,000, and the year-over-year increase was the largest since a 24.8 percent gain in October 2004. 

“We’re deep into uncharted territory: Amazingly low mortgage rates, a razor-thin inventory of homes for sale, and the release of years’ worth of pent-up demand. Plus there’s a seemingly endless stream of investors and non-investors who pay cash and thereby avoid the loan-qualification process. How this all plays out is educated guesswork at this point,” John Walsh, DataQuick president, said in a statement. 

“Understandably, speculation continues over whether another housing bubble is forming.” 

Price gains in the six county region ranged from 30.2 percent in Los Angeles County to 18.1 percent in Ventura County, DataQuick said. 

The median price has now increased on a year-over-year basis for 14 consecutive months, with those annual gains ranging between 10.8 percent and 24.7 percent over the past 10 months. But May’s median remained 27.1 percent below the record $505,000 median for the region in spring and summer of 2007. 

rising home prices2Michael Carney, executive director of the Real Estate Research Council at California State Polytechnic University, Pomona, believes that prices will eventually level out with the peak of the last boom remaining a distant target. 

“Those kind of increases can’t be sustained, 20 to 30 percent are enormous increases,” Carney said. “We’re not going back to the earlier (record price) levels. Not in my lifetime.” 

Prices are heating up now because of near record low inventory and because housing again is an attractive investment

“This has been going on for some time and it’s largely people chasing yield,” Carney said of the cash-flush market. “At this point, it’s looking pretty profitable to invest in housing.” 

Most of last month’s year-over-year gain in the median reflects rising home prices, while about a quarter of it reflects a change in market mix. Sales are increasing in more expensive markets and falling in low-cost areas, DataQuick said. 

Lack of inventory continued to pinch sales in May. 

Last month, sales across Southern California increased 3.8 percent to 23,034 properties from 22,192 a year earlier, DataQuick said. Last month’s sales total was the highest for the month of May since 30,303 sold in May 2006.

The spiking prices will likely shake loose some inventory, said DataQuick analyst Andrew LePage. 

“As prices continue to rise at this rate it’s almost a given. You will see what economists call a supply response and an increase in inventory,” he said. 

In addition, the housing market continues to wean itself of distressed properties. 

During May, foreclosure sales — homes foreclosed in the prior 12 months — accounted for 10.8 percent market share. That was down from 12.4 percent in April before and down from 26.9 percent a year earlier. Last month’s foreclosure resale rate was the lowest since it hit 0 percent in August 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009. 

Short sales — transactions where the sale price fell short of what was owed on the property — had 17.7 percent share last month, unchanged from April but down from 24.3 percent a year earlier. 

Absentee buyers — mostly investors and some second-home purchasers “” bought 29.5 percent of the homes sold last month. That was down from 30.6 percent in April and up from 27.5 percent a year earlier. 

The record was 32.4 percent in January this year. 

The number of cases of flipping properties for a quick profit remained low last month. 

During May, 5.9 percent of the homes sold had previously changed owners in the prior six months, down from 6 percent in April and up from 4.3 percent a year ago. 

Kimberly Ritter-Martinez, an economist at the Kyser Center for Economic Research in Los Angeles who has been tracking the market since its collapse in the Great Recession, said the housing market is finally healing. 

“It’s safe to say we are in recovery. It’s here and gaining momentum,” she said. “But my forecast for home prices is a lot of uncertainty.”

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L.A.-O.C. home prices up 10.2%, index shows

 by Jonathan Lansner and Jeff Collins, OC Register

Home prices in Los Angeles and Orange counties ended 2012 up 10.2 percent, according to the latest of four key home price indexes released Tuesday.

 The S&P/Case-Shiller index reported that single-family home prices in the two-county area bottomed out in June, followed by five months of rising home prices through December.

The annual increase mirrors a similar home-buying trend nationwide. Case-Shiller reported that home prices rose 7.3 percent across the country. A separate measure showed that home prices increased in 19 of 20 leading metro areas.

Case-Shiller is the latest in a series of home-price measures showing the momentum behind the housing recovery that took hold in the last half of 2012 after five years of declines and false starts.

The report reflects sales completed two months ago, but Anaheim broker Mike Deleon said competition remains tight among Orange County homebuyers, driving up prices.

“There’s multiple offers on every transaction that I’ve looked at,” said Deleon, president-elect of the Orange County Association of Realtors. “Prices are starting to go up due to low interest rates. As long as the Fed keeps rates low, we’ll see prices gradually rise.”

S&P Index Committee Chairman David Blitzer noted in Tuesday’s report that U.S. price gains in late 2012 were slightly lower than in the previous six months, suggesting that future gains may not be as big.

In the L.A.-O.C. area, however, just the opposite it true. Home price gains were higher from one month to the next in the last half of 2012.

Index Dec. Prices
Case Shiller 10.2%
CoreLogic 9.2%
DataQuick 17.5%
Calif. Realtors 20.3%

Previous housing reports showed

  • DataQuick Information Systems reported that the median price of an Orange County single-family home – or price at the midpoint of all sales — increased 17.5 percent in December. DataQuick later reported a 15.6 percent gain in January.
  • The California Association of Realtors’ median price for the county posted a 20.3 percent gain in December — followed by a 17.2 percent increase in January.
  • CoreLogic’s Home Price Index recorded a 9.2 percent gain in county home prices in December.

The sales reports use varying benchmarks to gauge the real estate market.

DataQuick and the Realtors association both compare all homes sold in one period to all homes sold in another. Their numbers reflect both rising home values and a shift in the market to pricier homes.

CoreLogic and Case-Shiller indexes compare each home’s sale price to its previous sale price. This minimizes the impact caused by shifting sales trends.

Read more about Case-Shiller’s report:

Success requires a singular focus

singular focus

Gary Keller’s new book, “The One Thing,” begins with this advice: “If you chase two rabbits you will not catch either one.”

This simple Russian proverb is at the heart of what it takes to have a meaningful life and a highly successful real estate business.

Over the last few weeks, I’ve had numerous conversations about what various industry leaders are doing to improve their businesses for 2013. Everyone seems to be narrowing their focus as opposed to expanding it.

For example, Marc Davison, co-founder of 1000 Watt, ended his Agent Reboot keynote by imploring the audience to find “the one thing that you will do and that will help you grow your business.”

Janet Choynowski of Immobel.com told me she has only one goal in mind for her business: the globalization of real estate.

Fafie Moore, president of Realty Executives of Nevada and the former chairman of the Las Vegas Chamber of Commerce, told me she had narrowed her goals for 2013 down to a single item.

Each of these industry leaders came to these conclusions separately. Keller’s “The One Thing” seems perfectly timed to capture this mindset by rescuing you from the onslaught of “could and should-do’s.” The book guides you to a place where you will have the greatest probability of achieving the singular goal that will make doing “everything else easier or unnecessary.”

The six lies that mislead and derail us

“The One Thing” begins by tackling the six lies that mislead and derail us. One of the biggest lies is that people can multitask. Motivational speaker and creative problem solver Steve Uzzell once said, “Multitasking is merely the opportunity to screw up more than one thing at a time.” Research has consistently shown that we can concentrate on only one thing at a time. According to David Meyer, a nationally recognized expert on multitasking, task switching increases the time it takes you to complete a task 25 to 100 percent.

To see how costly the three “D’s” are (distraction, disturbance and disruption), Keller cites the research that shows that we are interrupted every 11 minutes on average and that we spend almost a third of the day recovering from these distractions.

Consequently, a simple way to gain back a third of your day is to focus on doing one thing at a time. Put your phone on airplane mode and check it when you have completed the task at hand. Avoid trying to do two things at once. You will do both tasks more poorly, and it will take you significantly longer as well.

Other big lies include that “everything matters equally,” “will power is always on will call,” that a balanced life is achievable, and that “big is bad.”

The simple path to productivity

Mark Twain once said, “The secret of getting ahead is getting started. The secret to getting started is breaking your complex overwhelming tasks into small manageable tasks and then starting on the first one.”

Keller argues that the first step in this process is to ask a “focusing question.” Research shows that asking questions improves learning and performance by as much as 150 percent. The focusing question that he recommends is: “What’s the one thing I can do such that by doing it everything else will be easier or unnecessary?”

The power of this question is that it not only helps you to identify the “big-picture questions” such as “Where am I going?” or “What target should I aim for?” but it also helps you answer the “small-focus” questions such as “What must I do right now to be on the path to getting the big picture?”

The big-picture question is about finding the right direction in life, and the small-focus question is about finding the right action to take.

The four P’s of extraordinary results

According to Keller: “Your big one thing is your purpose, and your small one thing is the priority you take action on to achieve it. Purpose is the guiding force in determining the priority that drives their actions.”

Keller also believes that the more productive people are, the more purpose and priority are pushing and driving them. “Personal productivity is the building block of all business profit. The two are inseparable … this is the straightest path to extraordinary results.”

The three commitments to your ‘one thing’

The first of the three commitments is mastery. Swedish psychologist K. Anders Ericsson discovered what he called the “10,000-hour rule.” It takes 10,000 hours of practice to become an elite performer. Keller suggests that in terms of how this relates to you and your work, you’ll need to average four hours per day, five days a week, for a full year to master your “one thing.”

The second commitment is moving from “E” (entrepreneurial) to “P” (purposeful). The cycles for these two types of behavior are quite different. When the entrepreneurial person hits her ceiling of achievement, she experiences disappointment first, resignation second, and then she searches for greener pastures where the cycle will repeat itself.

When the purposeful person hits his ceiling of achievement, the person strengthens his focus. The person is committed to growth, and seeks new models or systems to continue that growth. It’s these new models and/or systems that allow the person to achieve breakthroughs.

The third commitment is accountability. Rather than allowing life’s events to victimize you, the purposeful person owns the situation and searches for solutions. This allows him or her to stay in action and to continue the breakthrough process.

If you’re ready to achieve extraordinary results in your business and your personal life, “The One Thing” is the one thing you must read this year.

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9 Easy Do-It-Yourself Weekend Decorating Projects

weekend decorating tips
As you look around your home, you’re probably wishing you had some extra time on your hands to make a few renovations or to handle a few extra redecorating projects. But, you already have the time – it’s called the weekend! In that short 48-hour time span, there’s a lot of work you can get done. Even if you pick one task per weekend, that’s four decorating projects completed a month!

Don’t think it can be done? Well just check out these nine simple weekend decorating projects that can each be started Friday evening and wrapped up before you go to bed Sunday night.

1. Organize and Beautify Your Bookcases

If you have a lot of books, videos and collectibles clambering for space on your bookcases, taking a Saturday afternoon to remove, sort and organize everything will instantly make the room look cleaner and tidier. Sometimes successful redecorating isn’t about changing the way things are but more about cleaning up and organizing what you already have.

This is also a good time to de-clutter your bookcase. Tossing out old magazines or storing books you no longer want in the garage can go a long way towards making the most of your bookcase’s capacity.

2. Tile the Kitchen’s Backsplash

If you really want to give your kitchen an updated look but you can’t afford a complete renovation, install ceramic tile to the backsplash for an instant update. It may take some time to get up and running, but once you find your swing, you’ll discover this job moves along at a smooth pace. Both weekend days will be required for this job, and you might have to extend the finishing touches over to next weekend, but you’ll be able to get the bulk of the heavy lifting done in one weekend.

3. Transform the Fireplace

The fireplace is the focus of the room during the cold, winter months but what do you do with it for the other eight months out of the year? Once winter’s chill has left, clean out the fireplace and decorate the hearth with a variety of low-maintenance plants and add a touch of vibrancy to the room. Succulents work nicely because they don’t require a lot of watering or sunlight. Use tiered plant pot holders for a truly beautiful look that will also cover up the unsightly cinder stains on the inside of the fireplace. Or, for a complete re-do, you can even consider painting the fireplace!

4. Install Some Molding

Crown molding makes a room feel and look larger than it really is, and it’s not really that difficult to install, especially when you use specially-made corner pieces that eliminate the need for cutting perfect mitered edges. In fact, once you get the hang of it, you might be able to install it in all of your rooms before the weekend is over.

While you’re at it, you can also install chair railing or update your baseboards with a newer, more modern style.

5. Unify Your Picture Frames

Odds are the picture frames that adorn your walls have been purchased over a long period of time, so no two probably look alike. But, if you take them all down and paint the frames all the same color, they will suddenly look as if they all belong together. In addition, this will help give your room the color accent it’s been missing.

6. Update the Kitchen Cabinet Hardware

Forget about the old brushed nickel cabinet knobs. Today, hardware stores have a ton of different varieties to choose from. Pick a style that best reflects your home and replace the knobs in your kitchen for a quick and easy kitchen makeover.

7. Makeover Your Lamp Shades

Adding some fabric, beads or ribbons to your lamp shades will turn them from drab to fab. Choose a color scheme that compliments the room and your friends won’t stop asking you, “Where did you purchase those beautiful lamp shades and how much did they cost?”

8. Redecorate the Bedroom

All you need to redecorate your bedroom is some fresh paint, some new curtains and a new comforter and voila – you have a freshly redecorated bedroom. The bulk of your time will be spent re-painting the bedroom and that won’t take that long at all, so go ahead and start planning your bedroom’s new look.


9. Add Some Fresh Flooring

If you have hard surface floors, add some color and style to the room by incorporating a few area rugs and/or carpet runners. This is an especially good idea come winter time as the carpet will help keep your feet off the cold floor and help insulate the room.

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Six Reasons Housing Inventory Keeps Declining

Housing inventory decline

Home sales in December dropped by 1% from November, the National Association of Realtors reported on Tuesday, but still stood nearly 13% above the levels of one year ago. That means home sales have risen from the year-ago month for 18 straight months.  For 2012 as a whole, sales were up 9% to 4.65 million units, the highest annual total since 2007. Prices, meanwhile, are picking up because the number of homes for sale continues to drop despite the sales volume gains. The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November and a 21.6% decline from one year earlier, the Realtors’ group said on Tuesday. Here’s a breakdown of why inventory has continued to drop this year:

 

Many homeowners are underwater: More than 10 million homeowners owe more on their mortgage than their homes are worth, according to CoreLogic Inc. CLGX -1.03% That pencils out to around 22% of homeowners with a mortgage, or 15% of all homeowners (since not every homeowner has a mortgage). Underwater owners aren’t likely to sell unless they need to move due to changing life (marriage, divorce) or financial circumstances, and they’ll take a hit on their credit for pursuing a short sale, where the bank allows the home to sell for less than the amount owed.Data from CoreLogic show that inventory has been the most constrained in housing markets where there’s the largest concentration of underwater borrowers.

Others don’t have enough equity to “trade up”: Another 10 million homeowners have less than 20% equity in their current residence, meaning they can’t easily “trade up” to their next house. Traditionally, homeowners have relied on home equity to make the down payment on their next home, and to pay their real-estate agent to sell their current home and buy their next one. These “under-equitied” homeowners—meaning they don’t have enough equity to make a move to a more expensive home—have added to the drag on inventory.

Everyone wants to buy at the bottom, but few want to sell: Even those people who do have plenty of home equity are likely reluctant to sell if they think prices will be higher tomorrow. Would you sell your largest asset today if you thought it might be worth 5% more next year? This helps explain why markets such as Denver and Dallas, which didn’t have huge housing bubbles and thus had smaller shares of underwater borrowers, have also seen double-digit inventory declines.

More purchases from investors of all stripes: From the big institutional investors that have been grabbing all the headlines, to the mom-and-pop landlords that have traditionally played a much larger role renting out homes, investors have increasingly bought homes that can be rented out rather than flipped and resold for quick profits. This is further keeping inventory off the market in two ways: homes that are bought at courthouse foreclosure auctions never show up on multiple-listing services when they’re initially sold. They’re also held out of the for-sale pool because they’re being rented out.

Banks have been slower at foreclosing: Banks and other companies that process delinquent mortgages have had trouble proving that they’ve followed state law in taking title to homes ever since the “robo-signing” scandal surfaced in late 2010, and they’ve also had to meet a host of new state and federal rules governing loan modifications  and foreclosures from settlements spawned by the robo-scandal. Banks have also become better about approving short sales and loan modifications, which has curbed the flow of foreclosed properties onto the market.

Builders have been putting up fewer homes:
Housing starts were severely depressed from 2009 through 2011 and have only recently rebounded off of those low levels. Consequently, there’s been much less new home inventory being added to the market at a time when demand (boosted by increases in household formation) is picking up. If more homes are held off the market—for any of the five reasons above—you can bet that builders will move in to fill the void.

Many of these factors that have been dragging down inventory aren’t signs of “normal” or “healthy” housing markets—but then, we probably haven’t had a normal market for around a decade now. If anything, declining inventory shows that normal supply-and-demand dynamics are returning, which is an important step towards putting a floor under home prices and giving markets time to get back to health.

Contact Roy at RoyaltyAgent@gmail.com

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6 Ways Your Home Can Help You Retire

Once upon a time (i.e., 2006) in a magical place called the Bay Area, the real estate market got so heated that it became commonplace to hear coffee shop patrons trading stories about their little old million-dollar houses. It became equally commonplace for this excess of home equity to create a false sense of financial security, causing many a homeowner to save less for the future than they might have otherwise. This practice was just as inadvisable as it was common, as evidenced by a retirement planner’s primely located billboard at the time, which read:

“My house is worth a million dollars” is NOT a retirement plan.

But many people treated it like it was, to their detriment.

Relying upon your home equity for retirement requires that you sell the place at some point, cashing out and moving to someplace cheaper (and potentially less desirable) to live, when you stop working.  That said, there are a number of other, less risky ways you can use your home 5, 10, even 20 years in advance of your planned retirement date to:

  • save cash now, so you can add it to your investments

  • increase your income now, also adding it to your retirement nest egg, and/or

  • reduce your expenses later, which might allow you to retire sooner (at a time when retiring at all is a true feat).

Here are six sets of strategies for using your home to help you retire – without having to  sell the place and retire in Timbuktu:

1.  Put your spare space to work.

Depending on where you live and whether you have room, you may be able to rent your home out, a little bit at a time. On sites like VRBO and Airbnb you can rent out as little as one room, your mother-in-law unit or your whole house for one night, one week or one month (or any combination of these). Also, savvy homeowners are increasingly renting out spare rooms or floors for the long-term.  I know a number of people who are now renting out their own homes while they travel on their own vacations, and still others who rent out their extra rooms while they’re at home, enjoying the side benefit of meeting new people.

If you do put your extra rooms to work, you can use the extra income to pay down your debt or to pile onto your retirement fund – just be careful of your local rent control laws, especially if you’re doing anything longer than a vacation rental.

2.  Hack your utilities.  

If you do the whole weather-stripping-and-dual-pane-windowing drill, you definitely stand to save some cash on your monthly utility bills. But in some areas, homeowners might also be able to save, big-time, with little or no cash out of pocket by opting out of their regular utility service and into something called solar power service. These companies sell solar power as a service, on a long-term contract, so home owners don’t have to pay for panels, then charge a lower power rate than the traditional utilities.

What you save over these years you can redirect to your retirement.  And to boot, some of these companies also allow you to fix your utility rate for a 20-year period so that in your retirement years, you will not be exposed to the unpredictability of energy rate increases.

3.  Pay your mortgage off early.

There are two levers you can pull to supercharge your retirement plan: (1) you can boost the income you’ll have to save and live on or (2) you can slash your future living expenses. The largest of these living expenses is, of course, your mortgage. For my grandmother’s generation, the norm was to pay off your 30-year mortgage right about the same time you were winding down a 30-year career. But today, it’s much more common for people to retire with 5, 10, 15 years or more still left on their mortgages.

One way to get to retirement sooner? Pay your mortgage off early. Enter three different time frames in which you’d like to pay your home loan off (i.e., in 7, 9 and 11 years from now) and enter that time period and the current balance you still owe on your mortgage (loan amount) into our mortgage terms calculator to figure out how much you’d have to pay every month to meet any of these targets.

If you can’t swing making a higher payment for one of your ideal payoff time frames, try this: simply round your monthly payment up to the nearest hundred or thousand dollars every month, if you can afford it. You’d be surprised at how even small, extra payments can snowball into an early mortgage payoff.

Here’s another option: pay 1/2 of your monthly every two weeks – because there are 52 weeks in the year, paying on that schedule results in making 26 half, and 13 full payments each year. The extra payment can pay off a 30 year loan as much as 4 or 5 years early! (Note: you can get the same result by simply paying an extra 1/12th of your mortgage payment every month.)  However you do it, make sure you tell your mortgage servicer to dedicate any overage you pay toward your principal balance.

4.  Tune up your mortgage.

If you’ve been in your home a few years, it can be easy to tune out of the whole mortgage scene – especially after five years of mostly bad news. But the news now might be better than you think, as home values are starting to steady and even edge up, and rates are still uber-low. If you have a 6 percent home loan you got 6 years ago, you stand to save thousands and thousands of dollars by refinancing into a 3.6 percent loan (the going rate this week). And that’s thousands and thousands you can put into your retirement fund. (Of course, the precise amount that you personally will save from refinancing depends on your current interest rate, your loan amount and the costs you incur refinancing.)

So, reconnect with your mortgage broker and pay attention to interest rates – especially if you’re paying more than 5 percent. And just generally click out of mortgage autopilot, watching your statements and asking questions about things you don’t understand. For example, you might still be paying a Private Mortgage Insurance premium that you can get removed upon request, assuming you’ve been in the loan long enough and your home has enough value beyond the loan amount (the precise standards vary from loan to loan, but check in with your mortgage broker and your lender to see if you can ditch your PMI payments anytime soon and put that money toward your retirement savings).

5.  Start a side business from home.

Put your home to work! Whether you use your space to dog-sit, baby-sit, bake or make preserves to sell at the farmer’s market, using your home to start a side business or to work a side job can pull the “extra income” lever of the retirement cushion-fluffing equation. It might also enable you to claim a home office deduction from your income taxes, depending on whether you’re able to dedicate the space completely to your business endeavor.

Read The $100 Startup to make sure you don’t spend more in startup expenses than you make. Also, consult with a tax expert to be sure that you dot your i’s and cross your t’s; depending on how you structure your business, you may end up increasing your tax burden, an unpleasant result a real pro can help you avoid.

6.  Trim your taxes. Follow these steps:

  • Type your address into the search box at Trulia.com.
  • Compare the Trulia Estimate against the tax assessment (you can find your assessed value on the same page under Property Taxes, or on your tax bill).
  • If your Trulia Estimate – or the prices you know nearby homes have recently sold for – is at or below the assessed value, you may want to apply to have your home’s value reassessed.


On your county tax assessor’s website, you’ll find the instructions and paperwork for submitting this request. (If you don’t, give them a ring!) They generally will ask you to tell them what you think your home is actually worth, and to provide some recent, comparable sales to back that dollar amount up (scroll all the way down on your home’s Trulia page, to the Sold Properties section for recently sold homes that might work).

The theme?  If you can save on taxes, utilities or mortgage interest, we’re talking about the potential to save tens, even hundreds of thousands of dollars over the years between now and retirement – much more than cutting back on coffee or the occasional meal out. Same goes with using your home to bring in some extra income or paying off your mortgage early – the potential retirement-boosting results are unparalleled.

Home Sales and Prices Up, Outlook Promising

for sale signTwo new reports identify encouraging trends in local housing this month along with several surprising jobs and demographics trends in Orange County over decades.

Home sales in Orange County jumped 23.1 percent from May in 2011.

Prices also climbed, although much more modestly.

The median home price was $435,000 last month, up 2.4 percent from $425,000 in May 2011 In Orange County, 3,279 homes were sold in May compared to 2,664 the year before. The latest housing figures combine with a new report by UCI researchers that idenities a number of positive and surprising trends in factors that affect Orange County’s Quality of life.

“The market is being slowly nursed back to health by low-interest rates, a modestly improved economy and, we suspect, a widening sense that the housing sector is at or near bottom,” said John Walsh, DataQuick president.

“There’s still plenty of uncertainty swirling around out there. But it looks like more move-up buyers are concluding it makes sense in the long run to sell their homes now, even when it’s hard to swallow the price.”

A total of 22,192 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in May, according to DataQuick. That was up 15.1 percent from 19,284 in April, and up 20.6 percent from 18,394 in May 2011.

The median price for a Southern California home was $295,000 last month, up 1.7 percent from $290,000 in April and up 5.4 percent from $280,000 in May 2011.

A Southern California Regional Progress Report released today by researchers at the University of California, Irvine examines the juxtaposition of jobs, housing, commute times and demographic sin Orange County along with their quality of life impacts. In multiple findings, Seal Beach fared well compared to the regional average.

“This inaugural study provides a wealth of findings on the area’s changing landscape – findings that constitute crucial considerations for successfully planning a future with  healthy, sustainable, affordable, safe, economically vibrant and just communities in which residents enjoy the many benefits of Southern California,” Valerie Jenness, dean of UCI’s School of Social Ecology said in a written statement.

Among the findings release by UCI:

  • Many of the lowest foreclosure rates are found in wealthy Orange County communities. The hardest-hit Orange County clusters in 2008 and 2009 were Anaheim, Rancho Santa Margarita and Santa Ana. The Seal Beach cluster was the only one in Orange County below the regional average for foreclosures between 1995 and 2010.
  • Many of the areas with the least overcrowded housing are in suburban locales, including Mission Viejo, Seal Beach, Rancho Palos Verdes and Agoura Hills. In Orange County, only the Santa Ana cluster had significant overcrowding, with more than 30 percent of its housing units qualifying as such in 2007.
  • Contrary to some perceptions, growth in immigration is associated with more stable home values, lower joblessness and less crime in most areas of Southern California.
  • Those clusters in which commute times were shorter tended to be rich in jobs and available housing – a sign that mixed-use neighborhoods are more convenient for
  • residents. The Irvine cluster, a relatively jobs-rich area, had the lowest average commute time in the county (23 minutes). In all, seven of the 15 Orange County clusters saw commute-time decreases from 2000 to 2007.
  • Southern California’s ethnic makeup has changed radically over the past five decades, with the percentage of whites slowly decreasing, African Americans becoming concentrated within fewer communities, and Latino and Asian populations growing significantly.
  • The foreclosure crisis has begun to abate but has had a sizeable impact on home values. Hardest hit were residents of San Bernardino and Riverside counties. Foreclosure rates also correlated strongly to falling home values throughout the region. A 1 percent increase in neighborhood foreclosures reduced home sale prices by 5.9 percent the following month.
  • Home ownership corresponds to lower crime rates. Conversely, a higher number of vacant units equates to higher crime rates.
  • Southern California air quality has improved dramatically during the past three decades, despite the increasing population.