Repomans QuarterlyJanuary 2010 Edition- Happy New Year.The year 2010 is finally here! Good riddance to 2009, which was not a good year for real estate in Idaho. However, 2010 begins with fantastic conditions for buying/investing in real estate in the Boise area:
Investors- Now is when the real money is made in real estate. Buying low is half the battle. The other half is holding until you can sell high. I’m thinking 3-5 years out minimum. Contact me for homes that will, until prices rise, provide reliable return on investment with positive cash flow, the tax benefits of depreciation and the ever-increasing principle reduction with each payment.
Fixer-uppers- with so many bank-owned homes available and sold as-is, there is no shortage of homes with room for improvement. Most buyers will not buy fixers or may have trouble obtaining financing, greatly reducing your competition and increasing the likelihood of a larger discount. If you’ve got skills, or employees to keep busy, now is the perfect time to buy to re-sell in the summer peak or hold for long term gains. Contact me for money makers, like this...
Median Home Prices Down Again in 4th Quarter
Mortgage Rates near the bottom of the last 40 years- need I say more? Yes- great time to buy!
The Foreclosure Bubble continues to dominate our housing markets, but I am happy to report I have found evidence that we may be on the downhill side of the bubble, which manifests itself in the market first as short sales, then as foreclosed homes.
Short Sales- I’ve been tracking the short sales as a percentage of all homes listed for years now on my Market Monitor. The percentage has been steadily growing, now near 30% of all homes listed are subject to short sale. However, these numbers are skewed as fewer and fewer homes are listed for sale. It is a terrible time to sell, after all. By charting the actual number of short sales listed, I have discovered an unmistakable downward trend in both Ada & Canyon Counties! See the chart below. I would feel better seeing improvement in employment numbers, but this is a great sign that the worst has passed.
This article came out since my newsletter and supports my findings:
Daily Real Estate News | January 22, 2010
Fewer Defaults: Could the Worst Be Over?
I’ve got one going right now where I represent the buyer. The seller accepted our offer over 3 months ago and we’re still waiting for the bank to respond- if they ever do. This is not unusual in short sales- my record is 5 and a half months for a response and the bank countered higher- even as prices were falling! This makes it impossible for the buyer to time a move, lock in an interest rate or have any confidence in making the deadline for the tax credit. My advice- look at short sales last.
Foreclosed Homes- Since many of these are unsuccessful short sales, I see more coming in the future, but in lesser numbers. Today we stand at a record 590+ bank-owned homes listed for sale in the Boise metro area. This is only slightly higher than last winter’s peak of 550 homes, and represents nearly 10% of all homes listed for sale in Ada & Canyon Counties combined. This what happened in 2009...
Free $$$ For Home Buyers- To qualify for the tax credit, you must have a home under contract by April 30th and close by July 1st of 2010. This credit does not have to be paid back, provided you live in the home for 3 years. You may also be able to use the credit at purchase through Idaho Housing’s “tax credit anticipation” second loans. Ask me for details and homes that quailfy for Idaho Housing loans.
Who qualifies? A first-time buyer, defined as those who have not owned a residence in the last 3 years, including spouses, may qualify for up to $8,000. Income limits are $75,000 single and $150,000 married, with a $20,000 phase-out over these limits.
Current Homeowners! If you have lived in the home for at least 5 of the last 8 years, then you may qualify for up to a $6,500 credit on your next home. You do NOT have to sell your current home, but you must stay in the next one for at least 3 years, or pay back the credit. This means you could rent out the previous home until the market improves for selling. If you choose to rent out the previous home, remember up to $250k single/$500k married of gains are tax-free as long as you lived in the home 3 of the last 5 years. One more important point: The next home does NOT have to cost more, allowing for downsizing. Give you any ideas? Contact me for details.
Excerpts from Oct 2009 Edition The Foreclosure Bubble in Boise Housing Markets
Excerpts from previous newlsetter- July 2009 Edition Short Sales - The Big Story in the Treasure Valley
Too many owners upside down! Lower prices and higher unemployment are causing increasing mortgage defaults. Most of these owners will attempt to avoid foreclosure by working out a short sale and settling with their lender(s) for less than what’s owed. Today, over 24% of all homes listed for sale in the valley are short sales. This huge bubble of distressed sellers offering liquidation prices is holding the market down. Sales have kept inventory down this summer, but this fall/winter short sale inventory will probably sky-rocket. These folks in default can’t wait for a better time to sell. Most short sale sellers will accept almost any offer, since most lenders won’t negotiate until a viable offer is in place. Foreclosures cost the lender big bucks and they will settle for substantial discounts. However, if your offer is too low, other buyers could beat you or the lender will decide to let it foreclose and take their chances reselling as an REO. The short sale process has some real problems, causing these homes to sell for even less. A response from the seller’s lenders, who must approve your contract with the seller, could take many months, if approved. This uncertainty makes locking in an interest rate impossible, timing a move unthinkable and the window for competing offers wide open. Consequently, buyers want an even better bargain for the hassle. Who knows what the market or interest rates will do in 6 months? Currently, there are 1,740 short sales listed for sale in the valley with 1,275 listed since the first of the year. Only 545 short sales have sold year to date and over 900 are currently under contract.
Down Payment & Closing Costs Biggest Obstacles? Horsefeathers!According to the 2009 National Housing Pulse Survey, an annual survey by NAR, 82% of today’s house hunters believe down payment and closing costs is too great an obstacle to purchase a home. This is a sad commentary on my fellow Realtors getting the word out. I’ve been getting sellers to pay closing costs for years, leaving little more than the down payment to cover. There are many ways to cover the down:• A “gift” from a relative or borrowing against your 401k or other assets is possible. • HUD has many homes available that qualify for FHA with only $100 down, rather than 3.5% normally required for FHA. • Idaho Housing has programs to finance the 3.5% down payment on small second loans designed to be paid back with the tax credit. They also offer classes, grants and below-market rates for first-time (not owned in last 3 years) homebuyers. • Some lenders now have programs that allow you to file for and use the tax credit money at closing!
Other results of the survey are interesting as well. A solid 83% of Americans still believe buying a home is a good financial decision. And 75% of those surveyed believe now is a good time to buy a home. I can’t argue with either of those, but 70% of respondents cite a lack of confidence in their ability to qualify for a loan. This one I have a problem with, when it is so easy to actually know if you qualify. You know what happens when you ass-u-me. FHA has stepped up with the easiest qualifying standards for homebuyers on loans up to just over $300,000. Credit scores in the low 600s can qualify and less than $1,000 can get you into a home with Repoman. Can you take advantage of the best buying conditions in years? A simple phone call to a local lender to discuss your income and debts can tell you if the next step is worthwhile - an application and credit check. Who knows? You may be approved and ready to start house hunting. See my Preferred Partners- bottom of my front page for a good local lender.
Excerpts from previous newsletter April 2009Stages of a Market Cycle
Source: Wescourt Funds 9/08
Inventory Drives Prices
Source: National Association of Realtors
1980-1985 1985-1990 1990-1995 1995-2000 2000-2006 25% 27% 25% 29% 89% Source: Brookings Papers 9/08
Excerpts from previous Newsletter- Dec 2009Do You Qualify? Know The Math.The debt-to-income ratio is all important in determining how much you can borrow. In general, your maximum house payment, including principle, interest, taxes & insurance, can be no more than 30% of your gross monthly income before taxes. For example, if you make $3,000 per month, your maximum payment would be $900 PITI. You'll need a professional to help you back out taxes and insurance and calculate the maximum loan amount based on current interest rates and down payment, but as a general rule of thumb you can buy a home equivalent to 3 times your annual income. With today's low rates- maybe a little more.Your debt ratio is also crucial. Debt is defined as consumer debt that lasts longer than a few months: installment purchases, car payments, student loans, child support, minimum payments on credit cards if you carry a balance. I use 41% as a rule of thumb, but it varies with the lender and type of loan. This is how it works. Your total house payment plus your debt can be no higher than 41% of your gross monthly income. For example: On $3,000 monthly income the maximum debt would be $1230. Back out the $900 and any debt over $330 will reduced your maximum payment. If you had a $500 car payment, your maximum payment could be only $730. Again, these are general rules of thumb and you should consult with both a lender and a Realtor concerning your unique situation. 5-Year PerspectiveIf you had bought a median priced existing home in the first quarter each of the last 5 years, this is how it would have performed in value, using 4th quarter median prices, the worst of the year, as today's value. Remember, the most affordable homes have performed much better than the median, higher priced much worse. Also, this does not account for any discount at purchase. See my Market Monitor for details.
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How about this fixer for only $36k in Nampa? This 3 br 2 bath fixer needs basement finished and more. Think about using your equity line to finance the purchase and repairs. Bring the value up to $75k and then get a new 30-year fixed loan to pay back your equity line. You could end up with nothing invested and a new income stream! And do it again. And again. And...
Judging by quarterly medians, prices are the lowest in 5-6 years in Ada & Canyon Counties. Be careful how you equate median prices to any particular property. With first-time homebuyers making up half of all buyers, double the norm, the medians are skewed lower by larger numbers of lower-priced homes sold. Contact me for a free market analysis, if considering buying, refinancing, renting or selling.
Boise- This nearly 2,000 sq ft 4 br 2 bath home with 2 car garage is priced near $25k below comparable homes and should rent for $950.
Meridian- This single level 1340 sq ft single level 4 br 2 bath home in Meridian is priced well and should rent for $875. On a $100k offer with 25% down and a fixed rate of 5.5% for 30 years, payments would be:
Nampa- This newer single level 3 br 2 bath 2 car garage should rent for $650 or more.
Caldwell- This newer single level 3 br 2 bath 2 car garage should rent for $650 or more.
Middleton- This 1500+ sq ft 2-story 3 br 2.5 bath with 2 car garage in nice sub should rent for $725 or more. On an offer of $75k with 25% down, 30-yr fixed rate ay 5.5%, payments would be:
More than one third of all homes listed for sale in the Treasure Valley today are in foreclosure (short sales) or foreclosed. Between short sale sellers racing to avoid foreclosure and lenders with record numbers of repossessions, this mass of homes being liquidated has placed tremendous downward pressure on prices, erasing all of the gains made during the boom of 2005-2006. It will of course take years to work through this mess, but once we pass the peak of the foreclosure bubble, prices will start to rise again.
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