New Jersey Estates/Weichert Realtors/ NJ Luxury Real Estate/ New Homes: December 2008

Real Estate Outlook: Affordability Dramatically Improved

How you see the real estate market at the moment depends on what parts you look at. If you focus primarily on mortgage rates and core affordability measures, you may see the country in a recession, but there are some very positive forces at work in the housing sector.

On the other hand, if you look at widespread employment losses -- 530,000 last month alone -- along with rising personal and business bankruptcies, mortgage delinquencies and foreclosures at levels not seen since the 1930's, you might ask: How can housing rebound if the overall economy is mired in such a mess?

And of course housing can't bounce back significantly unless national and regional economic fundamentals begin to improve. But there's at least an outside chance that housing could help in that whole process -- and begin to get healthier as a result.

Here's why: Number one -- affordability has dramatically improved since the end of the boom.

Thanks to severe price rollbacks and near-record low interest rates, homes are more affordable to households with average incomes than they've been for almost a decade. Standard and Poor's economist David Wyss calls affordability a major bright spot, and that's confirmed by the Housing Affordability Index compiled by the National Association of Realtors.

Mortgage rates are an important part of that equation, and they dropped again last week -- this time below five and half percent for 30 year fixed rate loans, according to the Mortgage Bankers Association.

Add onto this the Treasury Department's reported plan to cut fixed mortgage rates for home purchasers to four and a half percent through a "buy-down" program, and you've got the potential underpinnings for serious increases in home buying just over the horizon.

Some economists project an increase in sales of 500,000 to 700,000 homes in the coming 12 months if mortgage rates are cut by a point, AND if the new Congress agrees to include a non-refundable tax credit of up to 10 percent of the purchase price of a home in the economic stimulus package expected in January.

The idea here is to stoke up housing sales and construction -- and dozens of other industries through housing's well-documented multiplier effect -- the stimulus it gives through ripple effects into building materials, appliances, furniture among others.

This has worked before. Congress took precisely these two steps -- interest rate reductions plus tax credits for home purchases - in the 1970s, and the program had far-reaching positive effects on jobs and the economy as a whole.

It could happen again -- even if, on any given day, the picture looks a little grim.


Written by Kenneth R. Harney
December 16, 2008 

Homebuyer Survey Contains Valuable Information For Agents and Sellers

In 2008, first-time homebuyers constituted 41 percent of the market. That is the highest proportion since 2001, when it was 42%. There are apparently a number of factors to explain this increase, one of which is that first-time buyers don't have to sell a home before they can buy. Moreover, prices have been dropping while interest rates remain low by historical standards. Also, governmental policy changes, such as the tax credit for entry-level buyers, have no doubt played a role.

Six percent of buyers purchased a home that had been foreclosed or that was in the process of foreclosure. It can be expected that this type of purchase will probably represent a larger percentage when next year's survey is done. In 2008 a full 56 percent of buyers did not consider buying a home in foreclosure. Of those who did consider making such a purchase, but did not ultimately do so, the primary reason (21%) was that they simply could not find a home that was right for them. Twelve percent did not purchase a foreclosure home because the process was too difficult or complex. Another twelve percent did not buy because the house was in poor condition.

Certainly the most useful information for sellers and their agents is to be found in the section on the home search process. While the survey results are not significantly different from those of recent years, the trends continue. For example, this year 69 percent of buyers said that they used the internet frequently during the search process, up from 60% last year. In 2003 that number was 42%.

Thirty-three per cent of buyers went to the internet as the first step in the home search process. 17 % contacted a real estate agent first, and 9% began by driving through neighborhoods looking for homes for sale.

Buyers use multiple sources of information in the process of looking for a home. Far and away the most used sources are the internet (87%) and real estate agents (85%). What is the third most used information source? Yard signs (62%).

Multiple Listing Service (MLS) websites were the primary source of information for buyers who used the internet in their search process. 60 percent of those buyers went to MLS sites. Of course, many went to a variety of different sites. 48 percent used Realtor®.com, 46% went to real estate company websites, and 43% went to sites hosted by individual agents.

While there is a lot of intriguing information about the sources of information used by prospective homebuyers, certainly the most relevant has to do with where they actually found the home that they ultimately purchased. It is still the case that, more than any other source, a real estate agent is responsible for informing the buyer about the home that is ultimately purchased. That is how 34 percent of buyers found their home.

But the internet is a very close second (32%). Moreover, the differences in less than a decade are fascinating. In 2001, 48 percent of buyers learned about their home through a real estate agent, and only 8 percent found their home on the internet. The times they have changed.

Some things though, remain persistently the same - or close to it. In 2001, a yard sign was the third most likely source of information leading to the home that was purchased (15%). And this year? Fifteen percent.

The 2008 Profile of Home Buyers and Sellers shows what works. It is a valuable resource.


Written by Bob Hunt
December 12, 2008 

Real Estate Outlook: Mortgage Applications Rise

If new mortgage applications are a reliable gauge of forthcoming home purchases, looks like we've got a bumper crop taking shape out there.

Last week the Mortgage Bankers Association's national survey registered a record 37 percent jump in applications for new conventional loans to buy houses, and a 39 percent increase for home purchases using FHA mortgages.

The reason for the sudden surge? A half point drop in 30 year fixed mortgage interest rates to 5.47 percent -- which was down from 6 percent the previous week -- and to just 5.13 percent for fifteen year loans.

The rate drop happened almost overnight, after the Federal Reserve announced plans to pump up the housing sector by buying $100 billion worth of bonds issued by Fannie Mae and Freddie Mac.

The Fed also said it plans to buy about half a trillion dollars of mortgage-backed securities issued by Fannie, Freddie and Ginnie Mae beginning this month. Ginnie backs the FHA side of the market, just as Fannie and Freddie do on the conventional side.

So why did the Fed's moves mean so much? Because mortgage rates have been higher than they should recently due to bond investors' uncertainty about the safety of Fannie and Freddie.

Both companies racked up multi-billion dollar losses last quarter, causing investors to demand extra-high premium returns before they'd buy Fannie or Freddie debt.

But now that's over. The government's backing of Fannie and Freddie is explicit and big. Investors are reassured. They'll take lower premiums, allowing consumers to get lower mortgage rates.

Although lenders report their phones were jammed with applications from people who want to refinance, the big surprise was the huge jump in applications from consumers who plan to buy houses.

With prices down in the majority of markets, more and more people are finding that the equation now works: Fixed rates in the mid-fives combined with pricing at 2003 and 2004 levels make a compelling case that this is an excellent time to buy - provided you've got a downpayment and reasonable credit.

The bright spot in housing finance came in a week that was otherwise pretty much an economic downer: More bad news on Wall Street; followed by the official designation that we're now in a recession.

One additional bright spot to report: Unsold inventory -- the backlog of houses that weighs down local markets -- dropped by a full point and is now down 4 and a half percent for the year.

That's a very positive sign and should only get better with lower mortgage rates.


Written by Kenneth R. Harney
December 9, 2008 

Washington Report: Rate Reduction Proposals

All the details haven't been nailed down, but Washington has been buzzing in the past week that the Treasury Department has actually listened to the housing and real estate industries' calls for widescale rate reductions for home purchases.

The rate reduction proposals -- involving government purchases of low-rate mortgages to spur the economy -- have been pushed for the past month by the National Association of Realtors and the National Association of Home Builders.

In one version, a government agency, such as the Treasury Department, could buy 30 year mortgages at below market fixed interest rates of four and a half percent or even lower. In another version, the government could pay loan discount "points" or fees that would effectively lower rates to home buyers by one percent or more.

The idea would be to pull large numbers of people into the housing market to both stimulate construction and move unsold inventories of houses off builders and private sellers' books quickly.

Home sales and purchases are especially effective stimulators of economic activity because they generate huge ripple effects in other industries -- appliances, building materials, furniture to name just a few - and thereby help create jobs.

So would you -- or your clients or friends -- buy a well-priced house if you knew you could get four and a half percent long-term fixed rate financing ?

You bet, and so would potentially tens of thousands of other consumers.

The rate reduction concept has a history in U.S. housing policy that extends back for decades. Most recently it was used by Congress to stimulate home buying in the 1970s, in a program known as the "Tandem Plan."

In that version, the Government National Mortgage Association (Ginnie Mae) bought below-market interest rate mortgages from Fannie Mae, who in turn acquired them from participating local lenders around the country.

The private lenders and Fannie Mae didn't have to eat the losses involved in making loans at bargain rates. Instead, Ginnie Mae, which is part of HUD, absorbed the difference.

In a more recent proposal inside the Bush Administration, the Treasury Department could actually make money by cutting mortgage rates for home buyers. It could sell federally-guaranteed, super-safe debt securities to bond investors at 3 percent rates, and then acquire privately-originated mortgages at four a half percent.

That sounds like a profitable business model -- and one that just could have a huge impact on housing sales and prices.


Written by Kenneth R. Harney
December 8, 2008 

Will 2009 Be an Awesome Year? 10 Tips To Get Ready

Here are 10 areas to include when you do your planning for 2009.

1. Get to know yourself

Actually, I have a confession to make. I have been accused of being a control freak. I was surprised when some friends and family members all agreed to this. It's not how I see myself at all. Do you ever have that happen-someone shares how they see you and it isn't at all your own self-perception? It's good to check in by asking others what they see as your strengths (this is much more fun and ultimately more helpful than asking for the negatives!).

As part of the work we do in my annual business planning retreat, participants are asked to send at least 10 letters or emails to folks that know them pretty well to ask a few questions so they can get a sense of what people appreciate about them (that's always nice to know, isn't it?) and what they see as their unique strengths. Some traits will be ones you already know but some might surprise you. Use this information as you do your business planning to see how you can EXPAND the things you already do well.

2. Make some lists

My good friend Dr. Philip Humbert has a great, free tool called Goals-Setting 101^TM. He also has a wonderful weekly newsletter. Check him out, I think you'll enjoy this thinking.

3. Schedule the time

Yes, I KNOW you already don't have enough time. Or, maybe your one of the smart ones who has taken control here. Time Blocking is your tool to ensuring the important stuff gets done. It can move you from busy to effective. Put everything on the calendar. Yesterday I was speaking with one of my clients who had a goal to exercise this week. I asked her specifically when? You see, until it is on the calendar, the chances of you actually saying to yourself, "Ah, this is the perfect time to (fill in the blank-exercise,prospect,learn some technology)" are slim to none. But if you have it scheduled on the calendar for Thursday at 10-you just do it! Become like Nike! My favorite book on this subject is by David Allen, Getting Things Done .

4. Give Up The Unessential

Each year I look at what I am not enjoying any more or what I should give to someone else. Life is too short to perfect your weaknesses! Let someone else use their strengths to do the things you should not be spending your time on. Get a virtual assistant (or two) or here's a site to help with just about anything. As you plan 2009, step back and question EVERYTHING you are doing. Do LESS and you'll achieve MORE (reread the quote that I began with!)

5. Say No

This probably falls within that control freak category I (and maybe you) know so well. I have learned I am NOT the only one who can do what needs to be done and more enlightening, my way isn't necessarily the ONLY way or the BEST way! Say yes only to the things that make your heart sing! Note: They will still like you even if you say no. You can even be helpful and suggest who else they might ask. Practice this. No. No thanks. I'm flattered you asked, but I am not the person for this job. Say NO to the jerks who will turn into high maintenance whiners. Life is too short to work with jerks!

6. Look For The Opportunities

The rules have changed, along with the results for doing the same old thing. But then, you've noticed that, haven't you? What do the consumers you want to serve need right now? What are those needs accentuating that could lead to a new business model or a new way of serving the public. My friend, Mollie Wasserman, wrote the book Ripping The Roof Off Real Estate a couple of years ago and is one of the forces behind the Accredited Consultant in Real Estate - ACRE Designation. Read the book. Sign up for the course *. It will give you an edge in this environment! (* Use the code win-win and save $25 on the course.)

7. Build Your Strategic Partner Network

Masterminding is a key concept that really came to the fore with Napoleon Hill's book, Think and Grow Rich. This is one of the back to basics ideas that always helps. Expand your network of others who are interested in the same demographic you are. Expand the number of positive people in your life. Expand the number of mentors you have. Expand the number of people you are mentoring. Join or start a BNI Group or a Red Hat Society.

Life is too short to play alone!

8. Focus Your Energy

Think about the power of the sun through a magnifying glass. Focused energy has power. I ask my coaching clients to identify the 3 most important things to do each day. Most people have a long to do list that isn't prioritized (if that doesn't describe you-congratulations!) By focusing on the 3 most important actions you could take, you leverage and increase the results instead of dissipating your energy in 20 directions. A corollary to this is to stop multi-tasking. You will actually be able to get better results when you aren't doing 2 or 3 things at once (and make fewer mistakes).

9. Be Radical

Seth Godin is one of my favorite authors. He is pretty irreverent about doing things with the pack. Here are a list of his FREE Ebooks that you can download:

Knock Knock,

Who's There,

Everyone's An Expert, and

The Bootstrapper's Bible.

Remember, Warren Buffet sells his stocks when others are buying and buys when others are selling and it has served him quite well. The public doesn't value the things you do that they can get from anyone. They value how you are different. What are you doing to WOW ???? Don't be ordinary. Be Extraordinary.

10. Find Something To Be Happy About

Laugh a lot. Celebrate often. Just smiling increases the serotonin in your system and is a powerful anti-depressant. When you are stressed: Stop. Take a few deep breaths and try smiling for a minute!

End your days by writing 5 things that went well today or that you are grateful for. The more time you direct your mind to what you have and what IS working, the more powerfully you'll attract more of that. The Law of Attraction does work and is simple (but some of the time not easy-be vigilant with letting go and/or redirecting the thoughts of lack or negativity). My Relax and Attract course would be a great way to end the year and get your thinking going with the flow for 2009.


Written by Joeann Fossland
December 2, 2008 

Real Estate Outlook: Sales Jump in Ailing Markets

It all depends on where you are right now in real estate, and whether you recognize the signs of the cycle bottoming out in some of the once-most distressed local markets.

Though the latest monthly sales numbers for existing homes were down slightly nationwide -- 3.1 percent on a seasonally-adjusted basis -- sales in some of the hardest-hit local markets are really taking off, according to the latest data from the National Association of Realtors.

Florida, once the east coast epicenter of boom and bust, is roaring back with big sales gains.

Overall sales of single family homes in Florida jumped by 15 percent for the latest month -- up 5 percent for condos -- compared with year-earlier levels.

In Palm Beach County, sales were up by 37 percent. In Ft. Myers by 44 percent, Miami 23 percent, and 35 percent in Charlotte County.

Some scattered, smaller markets saw sales explode by as much as 70 percent, according to a report in the Sarasota Herald Tribune.

In some of California's most challenging markets, sales are also way up -- and apparently heading higher. In Orange County -- south of Los Angeles and close to ground-zero of the housing bust on the west coast -- sales rose by 66.6 percent last month compared with the year before. And they were up by 62 percent year over year the month before.

This is the fourth straight month of significant sales increases for Orange County -- a sure sign that something important is underway there.

And let's be frank about what's really going on.

It's the same dynamic as in Florida: Prices have dropped sharply, bank foreclosures and short sales are dominating activity --- and now houses are far more affordable than they were three and four year before.

In Orange County median prices were down by 27 percent year over year last month. In Florida, prices are also depressed -- 24 percent lower than the year before. In Miami, the median is off by 30 percent.

Meanwhile the essential ingredient to turning low prices into rising sales -- affordable mortgage money -- continues to be a bright spot. Interest rates for 30 year fixed loans are hovering just above 6 percent, and are in the upper five percent range for 15 year loans.

As we've said before here at Realty Times, the stock market may be doing wild and crazy things on any given day.

But month after month, there are tangible indications that the housing cycle is beginning to come around.

You just have to be open to seeing them.


Written by Kenneth R. Harney
December 2, 2008 

Agents Need to Be on Guard When Handling Short Sales

When CAR met in Long Beach in October, issues related to short sales dominated those discussions. One problem, or incipient problem, had to do with paperwork supplied by lenders to the homeowners during the course of the short sale. The point at issue relates to whether or not a cancellation of debt has been effected. There needs to be some document or piece of paperwork that explicitly states that the debt has been cancelled. Otherwise, the homeowner may find that the sale has been approved, the lender accepted less than was owed, but the borrower still owes the balance of the debt. Unless the lender accepts the lower amount as payment in full, or clearly cancels the debt in some other way, the seller will have a continuing problem. And the seller will not be happy with his agent.

Worse, perhaps, is that some lenders are including in their packages documents that explicitly obligate the borrower for payment of the balance of the loan. Now, many -- certainly not all -- of these borrowers got themselves into their present position because they weren't careful about what they were signing. They are liable to make the same kind of mistake in the short sale situation. Real estate agents -- many of whom have portrayed themselves as "experts" in handling the short sale process -- need to be especially attentive to the paper work that affects their clients in short sale situations.

Another growing area of concern is the use, by agents, of third-party short sale companies and "consultants." The appeal of such entities is that they have, or claim to have, extensive experience and expertise in negotiating short sales. Most agents have neither. Hence, it can be an attractive proposition for an agent to outsource the nitty-gritty work of completing a short sale in return for a fixed fee or for some negotiated portion of the agent's commission.

What can be the problem with such arrangements? More than a few of the short sale companies have been found not to have a real estate license for the state(s) where they are doing business.

In California, a real estate license is required of anyone who solicits prospective sellers or purchasers, and/or who negotiates a purchase or sale of real property, in the expectation of compensation. (Business & Professions Code 10131) Other states have similar laws. Moreover, a real estate licensee is not permitted to compensate an unlicensed person for performing acts for which a license is required. (B&P 10137) Also, it is illegal for non-licensees to compensate such persons as well.

It is all well and good for an agent to employ a third party -- with the knowledge and consent of the principal -- to help with a short sale. But it's a good idea to check and make sure that third party has a real estate license.


Written by Bob Hunt
December 1, 2008