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

Regional Report: Northeast

It may seem premature to start going against the drumbeat of negative news regarding the national real estate market, but new numbers show that sales are increasing in some parts of the country.

The website RealEstateABC.com is reporting an aberration in price increase for one region in particular in their most recent report.

While the median average sales price fell for most parts of the country compared to last year, the Northeast showed an increase of almost $16,000 and 3.12% to an average $270,000.

That's no small number, and great news for folks who are looking to move to or invest in that region.

And when we look at reports from agents actually working in the Northeast, they seem to echo the good news.

Hilary Gilles of Summit, New Jersey says the strongest segment of her market are those homes priced over 1 million dollars, and those homes that are priced correctly are seeing plenty of offers.

But high dollars estates aren't the only homes that are doing well in the Northeast.

John Mesko reports that he has seen a lot of activity in the market for maintenance-free products like condominiums and townhomes.

There's even better news for buyers on the low-end of the market in Pennsylvania.

Agent John Salem in Pittsburgh says that the strongest segment of the market he's seen has been for low-end housing and first-time homebuyers.

So there appears to be good news all around for the entire Northeast segment of the national real estate market.

We'll continue to watch these reports to see if this trend continues here and in other parts of the country.


March 28, 2008 

Realty Viewpoint: Tax Benefits Make Homebuying Sound Decision

Now that we're over home flipping, let's get back to the realities of the true profits of owning a home. With the exception of 2007, homes have increased in value nationwide one to two points above inflation levels, which is good, but it's not an incredible return.

But when you add in government incentives, you can just about live for free when you own your own home, counting getting your equity back when you sell.

Did you know that when you pay points to take out a mortgage, whether you or the seller paid, you can deduct it? Hello, $1,000 or more!

Federally insured loans are another benefit. With home prices rising more quickly than incomes in many areas, qualifying for a conventional loan has been a challenge, but conforming loan limits have been temporarily raised, allowing people to buy higher cost homes using FHA, Fannie Mae and Freddie Mac guidelines. Home loan limits of $417,000 have been raised to $625,000 in many areas.

One of many benefits is being able to deduct property taxes from your federal income tax return. If you're a renter, you're paying someone else's property taxes and getting zero deductions. In effect, you're throwing two percent of your net income away. And that doesn't count the equity you're building for your landlord.

The government believes that homeownership means more stability for communities. So, whenever the economy goes in the tank and homeowners lose homes in greater numbers than usual, the government pulls out a tax benefit that makes it irresistible to own a home.

Usually when you sell an asset, you have to pay capital gains on it. When you make money, you pay taxes. But those concepts went out the window with the Tax Relief Act of 1997.

Before then, homeowners had a one-time lifetime capital gains exclusion when they sold a homestead. After 1997, you could sell your homestead and keep the capital gains up to $250,000 as a single or $500,000 as a married couple.

In addition, your mortgage interest is tax deductible, up to $1 million in mortgage debt. Thanks to the Mortgage Forgiveness Debt Relief Act of 2007, you can also deduct your mortgage insurance interest.

If your household makes an adjusted gross income of $100,000 or less, you can deduct PMI on your tax return. Families with incomes between $100,000 and $109,000 are eligible for a reduced deduction, so if you bought a home without 20 percent down or excellent credit, you can now deduct your PMI until 2010.

And that's just a few of the federal benefits, folks. We haven't even begun to talk about hardship benefits, property inheritance benefits, or what your state or local community offers in homebuying incentives. Take Florida where Realtors are reporting increased interest in homebuying due to the new portability provision in the state tax code which allows homeowners to transfer their Save Our Homes tax benefits from their old homestead purchased in 2007 to a new home.

The bottom line is that while homebuying is subsidized by the government, you'd be a fool not to take advantage. Just buy within your means, please.


Written by Blanche Evans
March 28, 2008 

Real Estate Outlook: Existing Home Sales Rise

We don't want to overplay the significance of this, but we actually got some positive economic news this week: Sales of existing homes last month rose for the first time in half a year, adding fresh evidence that the housing cycle may finally be bottoming out after nearly three years of correction.

The national gains in resales announced on Monday were not huge -- 2.8 percent for single family homes and 3.7 percent for condominiums. Total sales hit 5.03 million units, though Wall Street economists had predicted another DECLINE to a consensus estimate of around 4.8 million units.

So breaking the 5 million mark is pretty good, given where we are in the overall economy.

Now in fairness, the latest sales gains were accompanied by a decline in the national median price of homes sold -- down by 8.2 percent from year-earlier numbers.

You might think an 8 percent drop in prices is terrible. But let's face it: The only way we're going to burn off that 10-month overhang of unsold houses on the market is through more affordable, more realistic prices pulling buyers off the sidelines.

There's another factor at work pulling down the national median number: Relatively more houses are selling in places like Texas, North Carolina and Utah, where prices are moderate and affordable, while there are relatively fewer sales in ultra-high-cost California.

So the median price may be lower, but it's not just because home values across the country are crashing. The mix is different, so the median price is a lower number.

Low-cost mortgage money is also definitely helping to fire up sales. Average 30-year rates declined to 5.875 percent last week -- and any time mortgage money is under 6 percent, you're going to see more homebuying.

By the way, sales in California, which have been a leaden weight dragging down national market numbers for more than a year, are likely to improve in the coming months as the new "super-jumbo" FHA, Fannie Mae and Freddie Mac mortgages start hitting the street.

FHA's mortgages should be especially popular in California, where the median home price in some local areas like San Francisco exceeds $700,000. Thanks to FHA's low 3 percent minimum downpayment requirement, Californians should be able to buy a $700,000 house with just $21,000 down -- and walk away with a 6.5 percent 30-year fixed rate.

Fannie Mae and Freddie Mac, by contrast, want a minimum 10 percent down for their new jumbos.

So let's take our good news about sales and interest rates ... and look to better days as the Spring buying season kicks off.


Written by Kenneth R. Harney
March 27, 2008 

Washington Report: Buying Bonds and the Mortgage Market

Amid the scary financial headlines last week, there were some less-publicized developments in Washington that bode well for the home real estate market in the months ahead.

Federal regulators last Wednesday gave the go-ahead for Fannie Mae and Freddie Mac to buy an extra $200 billion in mortgage securities -- a move that pushed down interest rates for home buyers and refinancers almost immediately.

At the same time, the 12 Federal Home Loan Banks prepared a plan that could allow them to buy an additional $160 billion in mortgage bonds.

Now you might ask: How does buying bonds help the mortgage market ... or trickle down to help real estate sales?

Here's how: The biggest challenge in the capital markets right now is what economists call "illiquidity," which means that large U.S. investors aren't able to sell their mortgage bond holdings because global investors have lost confidence in their safety.

Now in reality, most of the mortgages in these illiquid loan pools are paying on time and often are not even subprime credit. But global investors still won't touch them because they got so badly burned in the subprime crash.

The new moves by Freddie and Fannie to buy up some of these securities are designed to break the logjam and get the secondary mortgage market flowing again. The same is true for the Federal Home Loan Banks.

So: We're looking at the prospect of up to $360 billion of fresh capital injected into the market. Who benefits?

Number one: Just about anybody looking for a mortgage. After the Fannie-Freddie deal was outlined in Washington last week, 30-year fixed rates dropped by anywhere from an eighth to a quarter point.

Rates fell back below 6 percent -- after hitting the mid sixes last month.

Another set of beneficiaries are likely to be thousands of financially-distressed homeowners with loans they can't afford. Fannie and Freddie promised to help some of these homeowners get into fixed-rate mortgages that they CAN afford.

Home buyers in high cost California and along the Eastern seaboard should also benefit: Part of the $200 billion is expected to finance some of the new "jumbo" mortgages authorized by the economic stimulus legislation through December 31 -- those are the big ones that go as high as $729,750.

At a time when the private capital markets are choked up with fear, moves by federal regulators to prime the pump and get fresh money into the housing market can only be a plus.

Which forces us to say: Now and then, amazingly enough, Washington works!


Written by Kenneth R. Harney
March 24, 2008 

Realty Viewpoint: No, No, No! Don't Listen To Econophonies!

NBC's Mad Money host Jim Cramer has been telling investors for months that it's stupid to put your money in real estate.

This is the same guy who only last week told investors not to take their money out of Bear Stearns -- right before it crashed to $2 a share.

Here's what happened as archived by business writers and YouTube bloggers.

As anyone with a piggy bank knows, we're in a money crisis because investment banks conspired with lenders to buy subprime-loaded mortgage-backed securities that blew up in their faces when borrowers started to default in record numbers.

Investment bank Bear Stearns was riding high at over $171 a share on January 17, 2008. By March 11, the stock had plummeted to $63. That's the day an emailer wrote Cramer asking if he should be worried about Bear Stearns liquidity and get his money out of there.

Cramer responded, "No, no, no! Bear Stearns is not in trouble. If anything, they're more likely to be taken over. Don't move your money from Bear."

The next day J.P. Morgan Chase & Co announced that it was purchasing Bear for $2 a share.

What's worse than having black paint all over your crystal ball is not having the balls to own up to your mistake.

When he was called on his expensive error, Cramer tried to sell it that he was talking about keeping your money in Bear's bank, not the stock. That the bank's money is being guaranteed by the Federal Reserve.

While it could be argued that the investor was also talking about the bank and not the stock, the question was asked on Cramer's stock blog, making it clear that the investor was worried about his stocks.

After Bear crashed on the 17th, Cramer's show that night filmed him saying -- you're going to get bailed out "with the hedgies -- as long as you didn't own the common stock."

DonHarrold.net has proof, says the operator, that on March 11, 2008 Jim Cramer actually listed Bear Stearns as a "Buy," but after Harrold's video aired, the buy disappeared on March 17th, causing Harrold to say Cramer rewrote history.

The reason we bring this to your attention is that Cramer has also been saying don't buy real estate for months.

Which is interesting as housing inventories are at their highest in years, interest rates are below six percent and housing prices are lower. If you had that criteria for a stock that you know everyone wants but might not be able to afford, wouldn't you rate housing as a "buy?"

Don't listen to Cramer. As he told Hillary Clinton in an interview, he's from Wall Street. He's not from Main Street.


Written by Blanche Evans
March 24, 2008 

Regional Report: Northeast

Though the economy for the entire nation is sluggish now, many economists are expecting a rebound by the second half of next year.

Lawrence Yun, NAR chief economist, predicts that the 2008 fiscal stimulus package should provide a much needed boost to the real estate market, and the Northeast region will be the first to show signs of stabilizing, and then strengthening, housing market conditions.

That shouldn't come as a huge surprise, says Yun, as the West seems to have been more severely affect by the current housing slump.

In looking at the market reports from some individual states in the area, we see a mix of good and bad news.

Starting in Providence, Rhode Island, Steven Gillikin reports that the multi-family market is really struggling in his area.

But agents in New York and New Jersey both report that if homes are priced correctly, they are selling in a relatively short amount of time.

Robert Frey of Larchmont, New York reports that sellers who price their homes correctly are selling them in a relatively short period of time. And Roni Chasin of Short Hills, New Jersey also reports seeing situations where correctly priced homes are receiving multiple offers.

Agents in Pennsylvania are reporting similar trends.

Bethlehem Realtor Joseph Finnerty says that his market is really starting to pick up in the second quarter of this year, which reflects Yun's prediction that the fiscal package should provide a huge boost to the US economy and real estate market.

The bottom line seems to be that, though the market isn't humming along as strongly as it was a few years ago, the Northeastern states are still managing to stay active.


March 21, 2008 

Realty Viewpoint: Newspapers Shoulda Been Nicer To Realtors

Newspapers have been crummy to the real estate industry for years, from ridiculous per-inch pricing to scathing editorials about commissions.

Now they're laying off editors, cutting down newsprint sizes, and wondering why they weren't nicer to their advertisers while they had the chance.

If they had been, they might not be losing 2.5 to 3.5 percent in circulation today.

A new study by the Project for Excellence in Journalism suggests that newspaper advertising revenues fell 7 percent in 2007 after a flat 2006. They also lost seven percent of their newsroom staffs.

The biggest losses were in classifieds -- largely real estate, employment and automobiles.

To blame is the Internet where lines per inch don't matter but clickthroughs do. Innovators like Realtor.com, Zillow, Craigslist, Monster.com, eBay and Edmunds.com give consumers robust, information-rich sites to peruse. They can find homes and cars faster and see what they're buying.

Try selling a home today without a video, virtual tour or multiple photographs.

Realtor.com and Zillow provide free marketing to Realtors, and they're pro-Realtor. That beats overpriced lines per inch and fuzzy photos any day of the week.

Realtors have cut their print budgets and put more money on the Web. Online real estate advertising is projected to grow over 12 percent in 2008, projects Borrell Associates.

The only thing propping up real estate print ads is sellers. They want to see their agent spend money. Yet, in a Realty Times survey with Classified Intelligence, Realtors said print advertising is overpriced and ineffective, even if sellers remain unconvinced.

The real reason online advertising is growing is that it's tailormade for small fry, like the individual Realtor. They're spending more, not less on advertising than ever before, even with the freebies they get from real estate portals. They only get 25 percent of their marketing paid for by franchises, brokers and others. They pick up the tab for everything else which is why they want the best bang for the buck -- their personal website, billboards, yard signs, flyers, and direct marketing where they can promote themselves as well as their listings.

Newspapers come in a distant fourth place at a little over 11 percent of an agent's annual advertising budget.

That's where they deserve to be until they deliver more value and stop piling on the industry.


Written by Blanche Evans
March 21, 2008 

Realty Viewpoint: Feds Unclog Mortgage Drain

The Office of Federal Housing Enterprise Oversight (OFHEO), Fannie Mae and Freddie Mac have agreed to a $200 billion bottle of Drano that will help to unclog the gunk clogging lending pipelines, but will it be enough to save the spring selling season?

It could if the GSEs can buy higher-limit loans in concert with loans going to consumers at lower interest rates.

Right now, that's possible. If you are a buyer or have a client who is a buyer, now is the time to lock in a rate, and go shopping for a home.

But keep in mind that your mortgage lender can't lock in your rate unless you've applied for a mortgage. That means that you've selected a lender, provided certain information so that the lender can pull your credit report and credit score, and that the lender has gotten back to you with your lock-in and APR rate.

Your rate is good for 30 days usually, and you can pay points to get the lock extended if you haven't started shopping for a home yet.

Now I know what you're thinking. Rates have swung wildly in the last few days, and you might like to hold off so you can catch rates down another quarter point or so. But there's a risk in doing that.

But there's a risk in doing that. You could get a lower rate, or rates may do the opposite and go up.

Right now, nobody knows what they will do. Veteran mortgage lenders like our own David Reed say they have never seen an interest rate environment like this before.

Reed advises that in times of such uncertainty, investors who want their money to work for them place it in bonds; and now that the Fed and OFHEO have come to the aid of conventional mortgages, we could see rates drift lower.

It's up to you if you want to take the chance.

One advantage to locking is that it puts you in decision mode. You're ready to buy and can move on to choosing the right property. If you don't lock, you could put off buying indefinitely, and miss out on the highest inventory of homes we've had in years.

To buy a home, you have three major points to consider -- price, interest rate, and housing availability.

If you can get all three at their best levels, you've likely made the deal of your life.


Written by Blanche Evans
March 20, 2008 

Is It Time For A Mortgage Product Recall?

During the past few years we have been talking about toxic mortgages -- and the need to avoid them. Without fail, each time the subject has arisen lenders would write to say we were wrong, that option ARMs and interest-only loans were simply "affordability products" with no financial sting. As to prepayment penalties and stated-income loan applications, they were -- we were repeatedly told -- minor concerns and not much of an issue.

We were needlessly worried, said lenders, because strong credit scores assured that borrowers could easily handle financing costs "if" monthly payments rose. But toxic loans were engineered to guarantee higher costs once start periods ended. There was no "if."

The credit score argument never made sense because good credit was being required before borrowers faced higher monthly costs. It's easy for some households to be well-qualified with a $1,200 monthly payment -- but underwater when that same bill rises to $1,800.

The other argument made by lenders has been that they were social do-gooders, moral folks offering cheap loans so more families could own housing.

Now we know that the do-gooder argument doesn't hold water. Figures from the latest Census Bureau survey show that homeownership in the last quarter of 2007 was down to the lowest level seen since 2002. You remember 2002 -- that was before toxic loans were widely marketed.

The reason millions of people are facing foreclosure today is very simple: A lot of money was made originating, selling and packaging loans with terms that were unfair and unconscionable from day one. Like tainted food, defective cars or toys covered with lead, such flawed financial products should be recalled at no cost to the consumer. After all, isn't that the moral thing to do?

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