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Tag Archives: property taxes
This Month In Real Estate – December 2009
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If you don’t buy a house now, you’re either stupid or broke
Interest rates are at historic lows but cyclical trends suggest they will soon rise. Home buyers may never see such a chance again, writes Marc Roth By Marc Roth.
Well, you may not be stupid or broke. Maybe you already have a house and you don’t want to move. Or maybe you’re a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don’t act soon, you will regret it. Here’s why: historically low interest rates.
As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above—which you can find on Mortgage-X.com—shows, is the lowest the rate has been in nearly 40 years.
In fact, rates are so well below historic averages that it should make all current and prospective homeowners take notice of this once-in-a-lifetime opportunity. And it is exactly that, based on what the graph shows us. Let’s look at the point on the far left.
In 1970 the rate was approximately 7.25%. After hovering there for a couple of years, it began a trend upward, landing near 10% in late 1973. It settled at 8.5% to 9% from 1974 to the end of 1976. After the rise to 10%, that probably seemed O.K. to most home buyers. But they weren’t happy soon thereafter. From 1977 to 1981, a period of only 60 months, the 30-year fixed rate climbed to 18%. As I mentioned in one of my previous articles, my dad was one of those unluckily stuck needing a loan at that time.
Interest Rate Lessons
And when rates started to decline after that, they took a long time to recede to previous levels. They hit 9% for a brief time in 1986 and bounced around 10% to 11% until 1990. For the next 11 years through 2001, the rates slowly ebbed and flowed downward, ranging from 7% to 9%. We’ve since spent the last nine years, until very recently, at 6% to 7%. So you can see why 5% is so remarkable. So, what can we learn from the historical trends and numbers?
First, rates have far further to move upward than downward; for more than 30 years, 7% was the low and 18% the high. The norm was 9% in the 1970s, 10% in the mid-1980s through the early 1990s, 7% to 8% for much of the 1990s, and 6% only over the last handful of years.
Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.
Finally, the most important lesson is to understand the actual financial impact the rate has on the cost of purchasing and paying off a home. Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed. While different in each region, for the sake of simplicity, let’s assume that the average person is putting $40,000 down and borrowing $200,000 to pay the price of a typical home nationwide.
Thus, over the course of the life of the loan, each quarter-point move up in interest rates will cost that buyer $12,000. Loan Costs Stay with me now. We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again. If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.
Let’s put that into perspective. You have a good stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is “more stable” and it’s safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.
If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you’re borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.
What I’m trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home.
If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime.
Source: Business Week
Yes, The Housing Market Has Rarely Looked Better
Passing through the Fort Myers, Fla., airport a few weeks ago, I noticed people eagerly signing up for a free bus tour of foreclosed real estate—with all properties offering water views. During the ride to my hotel, the young driver volunteered that he had just bought his first house, paying $65,000 for a foreclosed property in nearby Cape Coral that last sold for over $250,000. He said he had never expected to be able to buy anything on a driver’s salary, let alone something that nice.
Last week, Standard & Poor’s reported that its S&P/Case-Shiller U.S. National Home Price index of real-estate values increased this past quarter over the first quarter of 2009, the first quarter-on-quarter increase in three years. Its index of 20 major cities also rose for the three months ended June 30 over the three months ended May 31, with only hard-hit Detroit and Las Vegas experiencing declines. The week before that, the National Association of Realtors reported that sales volume of existing homes was up 7.2% in July from June.
In short, the data suggest that real-estate prices hit a bottom some time during the second quarter, and have now begun to rise. There’s no way to be certain that this marks the end of the long, painful correction that followed the real-estate bubble, but clearly prices are no longer in free-fall. That means if you’ve been sitting on the fence, it’s time to act.
Ordinarily I’d never try to time the real-estate market, but I can understand why buyers have been cautious. Few want to buy in down markets, just as stock buyers avoid bear markets. And for most people, of course, buying a house is a much bigger decision than buying a stock. But with real-estate prices nationally now down about 30% from their 2006 peak and showing signs of turning up, the prices aren’t likely to go much lower. Every real-estate market is local, and so there may be a few exceptions. Overall, though, I can’t imagine a better time to buy than now.
In addition to bargain prices, buyers also should find plenty of homes to choose from. The inventory of unsold homes was 4.09 million units in July, up 7.3% from June, according to the National Association of Realtors. And mortgage rates this week were at a two-month low of close to 5%, according to Zillow. Even the stricter appraisal process is working to the advantage of buyers. Appraisals are coming in far lower than most sellers have been expecting, forcing them to face the new reality of sharply lower prices. And with stricter standards, lenders aren’t going to let buyers borrow more than they can afford, which protects buyers and helps to keep prices down.
Unless you’re really prepared to accept the demands (and headaches) of being a landlord, I don’t recommend direct ownership of real estate as an investment. The days of buyers lining up to flip Miami Beach and Las Vegas condos are mercifully gone.
There are much easier ways to make money in real estate, such as real-estate investment trusts or buying shares in home builders and other housing-related businesses (such as Home Depot). Historically, the mean rate of return on real estate has been around 3%, according to research from Yale economist Robert Shiller, who co-developed the Case-Shiller index. Shares in REITs and other stocks have often done much better.
But there’s a good reason homeownership has been such a central part of the American dream. It delivers security, pride of ownership, a sense of community and decent investment returns as a bonus. I felt glad for my driver in Florida. He represents the other side of the foreclosure crisis. For every hardship story, and no doubt there are many, others are realizing their dreams of home ownership and getting what may well turn out to be the deals of their lives.
When will the housing market rebound?
When will the housing slump finally end? Even the experts’ crystal balls are hazy. The Wall Street Journal, which Thursday reported its latest quarterly survey of housing data, says it depends on which city or part of the country you’re talking about. Home sales were up compared to last year in Washington, D.C., and Northern Virginia, Orlando, Minneapolis, Southern California, and the San Francisco Bay area, according to findings from research firm MDA DataQuick as well as reports from local real estate practitioner organizations. Sales declined in New York City and nearby Long Island, Chicago, and Charlotte, N.C., and the outlook was particularly bleak in Miami-Fort Lauderdale and much of Florida, Detroit, and Las Vegas. But Jody Kahn, an analyst at John Burns Real Estate Consulting, a research organization, points out that there are variations even in the hardest-hit metro areas with the most attractive neighborhoods continuing to thrive. Employment is the most telling factor, says Mark Zandi, chief economist at Moody’s Economy.com. “If people don’t have jobs or fear losing their jobs, then buying homes is out of the question,” he says.
Source: The Wall Street Journal, James R. Hagerty (07/23/2009)
South Florida Market Looking Better
MIAMI – June 16, 2009 – South Florida home prices have hit bottom, but threats to the housing market still loom as foreclosures rise, mortgage rates creep up and inventories remain high.
That’s according to a prominent economist and several top real estate brokers who spoke here Thursday during the International Real Estate Congress hosted by the Realtor Association of Greater Miami and the Beaches.
“We’re certainly near the bottom if not at the bottom,” said Lawrence Yun, chief economist for the National Association of Realtors.
The median price of an existing single-family home in Palm Beach County has plunged more than 40 percent since 2005. Yun cited a study released last week by research firm IHS Global Insight that said home prices in Palm Beach County are undervalued by 32 percent.
Mike Pappas, head of Keyes Co. Realtors, agreed that the withering collapse of the past three years finally has ended.
“We believe the worst is behind us,” Pappas said.
That’s not to say that the housing market is poised for a big rebound. Realtors see obstacles, including:
• Foreclosures. The number of foreclosure filings in Palm Beach County rose 33 percent from April to May, research firm RealtyTrac said Thursday. “Unfortunately, foreclosures will continue to increase,” Yun said.
• Rising mortgage rates. The average rate for a 30-year mortgage spiked from 5.29 percent last week to 5.59 percent this week, Freddie Mac said Thursday. Yun acknowledged that rates above 6 percent would slow the recovery, but he predicted rates will fall to 5.2 percent later this year. “I believe the bond market is overreacting,” Yun said, causing rates to rise.
• High inventories. The number of homes for sale has fallen over the past year, but there remains a glut of homes on the market. Inventory “is still much higher than it should be,” said Ron Shuffield, head of EWM Realtors.
• A sluggish high-end market. Although properties priced at under $200,000 are moving quickly, the high-end market is “stagnant,” in part because of high rates for jumbo loans, said Rei Mesa of Prudential Florida Realty.
Copyright © 2009 The Palm Beach Post, Fla., Jeff Ostrowski. Distributed by McClatchy-Tribune Information Services.
This Month In Real Estate – May 2009
Want $8,000 back on your taxes?
ATTENTION: First Time Home Buyers!!
If you’re a first time home buyer, your timing couldn’t be better! The newly passed stimulus bill may qualify you for an $8,000 tax credit! With mortgage rates at record lows and a large selection of homes on the market, this is the perfect time to make a move toward owning your first home!
Keep in mind that a first time home buyer is defined as someone that has not owned real estate in the past three years; it doesn’t even matter if this actually is your first home or not! Call me for details or click here for Frequently Asked Questions and Answers.