—- from our October Newsletter —-

Home Sales Pace

Sales of existing U.S. homes rose in September, according to the National Association of Realtors, by 5.5 percent to a seasonally adjusted rate of 5.18 million units, up from 4.91 million units in August. That sales pace was also up 1.4 percent from September 2007 figures. Median home prices, however, fell by 9.0 percent to $191,600 during the same period, from $210,500 last year.

The NAR defines existing homes as all previously-owned single-family homes, townhouses, condominiums, and co-ops. The group "seasonally adjusts" the sales numbers to factor in things like inclement weather, school sessions, winter holidays, etc to smooth out the trends. The NAR also describes its sales data based on an annual pace. The monthly figure represents the total number of housing units that would be sold in one year if the current rate were to continue unchanged.

Sales Pace by Region

September's sales jump was led by an enormous increase in the Western sales pace. The West experienced a 16.8 percent rise to an annual rate of 1.25 million units compared with 1.07 million in August. That also puts sales up 34.4 percent on an annual basis.

The Midwest and South saw only minor growth in comparison with the West, while the Northeast saw a decrease in sales in September.

Sales in the Midwest rose to 1.19 million units, 4.4 percent higher than the 1.14 million housing transactions in August.

The South had 1.9 million sales in September, an increase of 2.2 percent from 1.86 million the previous month.

Finally, in the Northeast, sales of existing homes dropped 1.2 percent to 840,000 units, from 850,000 units in August.

Home Prices

The median home price, the point at which half of all homes are sold for more and half are sold for less, decreased in September, as a rise in home values in the West that was more than compensated for by price declines in the other three regions.

The median price in the Northeast dropped to $246,800 from $271,000 in August. The price has declined 5.4 percent in the last year.

The median price in the Midwest fell to $152,500 from $168,000 the month before and decreased by 7.9 percent since September 2007.

In the South, the median home price was down to $167,200 from $176,500 the previous month and 4.1 percent from one year earlier.

The median price in the West rose to $253,600 in September, up from $253,600, but the current price is still 18.5 percent below the going rate at the same time last year.

Inventory

The number of existing homes for sale in the U.S. continued to shrink in September, contracting to 4.27 million units, a decrease of 1.6 percent from August. The supply of homes available at the end of September represents a 9.9 month stock at the current sales pace; the August pace reflected a 10.6 month supply.

Next Report

Data for October existing home sales, prices, and inventory will be available at the end of November.

    

   —- from our October Newsletter —-

September was a month full of chaos in the mortgage and housing markets. Looming failure of Wall Street titans like Lehman Brothers and AIG, buyouts of troubled banks like Washington Mutual and Wachovia, and talks of federal government intervention made interest rates unpredictable for potential homebuyers. With ARM loan interest rates continuing to adjust upward, and energy and food costs remaining high, borrowers by the hundreds of thousands forced to enter foreclosure. In fact, according to the Mortgage Bankers Association, 40 percent of all subprime ARM loans in the U.S. were in some stage of foreclosure or default in September, with 12 percent of all prime ARM loans falling into the same category.

Widespread foreclosures create numerous problems for both individual neighborhoods and for the country as a whole. Obviously, on a national level, soured loans have cost companies millions of dollars and in some cases, their very existence. On a local scale, abandoned foreclosed properties that fall into disrepair are magnets for vagrants and criminal activity. Nearby homes also fall in value as foreclosed homes make the neighborhood less desirable to live in.

Millions more of American homeowners are expected to fall into foreclosure during the next few years. In some cases, there may be no way to save their home. Yet in many other cases, homeowners can avoid foreclosure by talking with their lenders and possibly taking advantage of new federal programs.

Talk to Your Lender

The first step to avoiding default and foreclosure is to approach your lender and tell him of your situation. If your ability to keep up with your payments is lagging, talk to your mortgage lender before you actually have to make a late payment.

Foreclosure means a huge loss of money for lenders, plus a lot of hassle to resell the property. Many would rather renegotiate the terms with you and possibly even write-down your mortgage balance a bit, instead of losing out completely on their investment when you default.

HOPE for Homeowners

In addition to early programs for struggling homeowners, the federal government started a new initiative in early on October 1, called HOPE for Homeowners, which could save as many as 400,000 American mortgage borrowers.

The program authorizes the Federal Housing Authority to back more adjustable rate mortgage (ARM) loans in danger of failure. It works like this: a worried homeowner contacts a HOPE representative. The representative works with the lender and voluntarily gets them to agree to write down the loan balance to 90 percent of the current value of the home. Then, they refinance the original mortgage into an FHA-guaranteed 30-year fixed rate mortgage with predictable monthly payments. As the value of the home appreciates in the future, the homeowner agrees to share some of that equity with the government.

In order to qualify for this program, borrowers must be able to fully document their income, occupy the property involved (no investment properties will qualify) and their housing costs after the refinance must total no more than 31 percent of their income (38 percent if they participate and in a 3-month trial period with timely payments.)

Borrowers interested in participating in the FHA program can contact their lenders, speak with a HUD counselor, or call 1-888-995-HOPE.

    

   —- from our October Newsletter —-

Home Sales Pace

U.S. existing home sales in August declined 2.2 percent to a seasonally adjusted annual sales pace of 4.91 million units from 5.02 million in July, according to the National Association of Realtors (NAR).The current figures are also down on a year-over-year comparison, falling 10.7 percent from the 5.5 million unit pace of August 2007.

The NAR definition of existing homes includes single-family homes, townhouses, condominiums, and co-ops. The group "seasonally adjusts" the sales numbers to factor in things like inclement weather, school sessions, winter holidays, etc to smooth out the trends. The NAR also describes its sales data based on an annual pace. This means that the monthly figure represents the total number of housing units that would be sold in one year if the current rate were to continue unchanged.

Sales Pace by Region

Regionally, falling monthly sales in the Northeast and the West were tempered with minor gains in the Midwest and the South.

The Northeast experienced a 6.6 percent decrease in sales from July to August and a 15.0 percent drop from August 2007.

The West saw sales fall 5.3 percent in the last month, but was the only region to see a year-over-year rise, as dramatically lowered prices helped work off some of the excess inventory. Home sales there increased 4.9 percent since August 2007.

In the Midwest, homes sales inched up 0.9 percent in August, yet fell 12.3 percent in the previous year.

The South had similar data to report, with a monthly gain of 0.5 percent, but a yearly decline of 15.1 percent.

Home Prices

As of August 2008, the national median home price had fallen 9.5 percent in the preceding 12 months, to $203,100 due to rising foreclosures, increasing inventory, and decreased availability of consumer credit. The median price represents the price that is the midpoint - half of all home sales prices were above the median and half were below. The median generally provides a clearer picture of home prices than the average or mean would.

By region, the median price decreased across the board. The West lead the way, as hefty foreclosure rates created an extremely competitive market, forcing sellers to drastically lower their prices. The median price in the West sank 23.9 percent since August 2007 to $251,600, knocking it out of the priciest region slot. The Northeast now takes that title, where the median home price is $271,000, although it still reflects a 3.8 yearly decline. The median price fell 5.6 percent in the Midwest to $168,000 and the median price in the South dropped 3.4 percent to $176,500.

Inventory

One bright spot in the month's report is that housing inventory is shrinking. In August 2008, there were roughly 4,255,000 existing homes on the market, a 7.0 percent decrease from the previous month and a 2.9 percent decrease during the 12 preceding months. At the current pace, it would take 10.4 months to sell all the available homes for sale at present.

    

    ...From the Lavery Team September Newsletter

Home Sales Pace Up

Sales of existing homes in the USA went up by 3.09% in July, to 5 million homes. We have not hit an annual pace of 5 million homes since last year. Unfortunately, this month's figures are well below last July (2007), by -13.19%.

The glaring inconsistencies were that sales were up in the West but the values were down remarkably. Also, though sales were up overall, so was inventory. We'll talk more about these things later.

Sales Pace by Region

For month-to-month comparisons, the sales pace was up everywhere, except the South, which was down only -.54%. Sales were up in the Midwest by 0.90%, in the Northeast by 5.88%, and in the West by 9.71%.

Year-to-year presents a different picture. Nationwide, the sales pace was down -13.19%. In the South, sales were slower by -18.14%, -17.04% in the Midwest, and -11.76% in the Northeast. Sales were actually up in the West, by 0.89%.

This measure tracks units - condominiums, co-ops, and single-family homes. "Sales pace" means is that the National Association of Realtors calculates how many homes sold, makes adjustments for seasonal factors like weather and school, vacations, then calculates how many homes would sell in a year at that given pace.

Next Report

August sales pace figures released at the very end of September.

The median average is the "midpoint" sales price. Half the homes sold above that price and half below.

Home Prices Fall Again

Nationally, the median average sales price fell compared to last year, down by -7.09%, with the new median average sales price of a home at $212,400. The Midwest showed an actual increase of value again, by 1.04%, followed by declines in all other regions: South by -3.5%, Northeast by -4.91%, and the West by a whopping -22.21%. The Northeast actually passed the West in median sales price.

We compare values to the same period a year ago. We do not use month-to-month comparisons because there are sometimes huge fluctuations in the size of houses that sell in different seasons. Larger houses sell during the summer when it is more convenient for families to move.

Inventory Up

It would take 11.2 months to sell all the existing homes currently available on the market at the current sales pace, and there are almost 175,000 more homes on the market than last month. There are 4.669 million homes listed for sale. We're selling about five million a year.

We measure inventory in two ways. "How many homes are available for sale?" and "How many months would it take to sell the total number of homes available for sale right now, at the current sales pace?"

When the sales pace declines, inventory measured in months will increase, even if the same number of homes is for sale.

    

    ...From The Lavery's August Newsletter

The foreclosure and housing "stabilization" bill made its way through Congress and the President, who initially promised to veto it, signed it into law.

All is right with the world.

Well, maybe not.

To qualify for the new Federal Housing Administration (FHA) loan requires you to have a loan-to-value of 90% or less, including the UFMIP (up-front mortgage insurance premium). That is 90% of the current appraised value (as determined by a certified FHA appraiser), not what you paid for the house.

Since the problem has more to do with home prices falling rather than "I can't afford the payment," this is a moot point for many homeowners.

Of course, you can talk to your current loan servicer and get them to forgive part of your debt. Debt forgiveness is (of course) income. Income is taxable by the Internal Revenue Service (and your state income tax collection service).

From the loan servicer all you have to do is get permission from the servicer, the investor (if there is one), whoever invested in the pools of mortgage-backed securities (if there are any), and the private mortgage insurance company (if there is one). Most people call this the "lender."

This process can take months. Some loan servicers can move faster because they have the experience.

For sales.

Not refinances. No lender wants to give away something free to someone that may benefit. They would rather foreclose and pay all the maintenance fees along with the costs associated with foreclosure.

Or deal with a sale.

The new FHA loan is not free, either. It's designed to protect folks from foreclosure, not protect them, period. As a result, borrowers share the growth in equity. If the house sells or is refinanced in the first year, the FHA gets all of the equity (appreciation). After one year, they get 90% of the equity.

This drops ten percent a year through five years until the FHA gets half the appreciation.

They never get less than half.

The maximum FHA loan varies by area, so you should check with your local Realtor for the maximum in your area. Also, FHA loans make the most sense for condominiums rather than Single Family Homes, co-ops, or two- to four-unit housing because you only pay the monthly mortgage insurance, not the UFMIP.

There are criticisms of the bill, but it will mostly help those few who are overwhelmed by their payment, not their value.

The bill also more tightly regulates Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). There are provisions for them to borrow money should they need it to stay afloat (sort of like the Chrysler loan many years ago).

    

Gorgeous two story home on 1/2 acre plus lot features: impressive two story foyer with second story window, kitchen with island and eat-in area with sliding glass door to the deck and patio. Family room with gas fireplace, formal dining room, master bedroom with full bath, walk-in closet and 10x6 sitting area. The view overlooking Elizabethtown is lovely.

    

  ...from The Lavery Team July Newsletter

The housing crisis is causing a mess, because of lower home values and massive foreclosures, often blamed on the sub-prime mortgage industry.

What started it?

From 1996 to 1997, the origination fee charged on a loan went from 2.1 to 0.6 points. Folks were looking for cheap refinancing and financing for houses escaping the last housing crisis. That crisis only hit values in some states and began in the early nineties.

Houses and condominiums were suddenly worth something again in those areas.

So were the loans.

Unfortunately, the timing coincided with people falling in love with the internet. Instead of the "old fashioned" way of finding a lender, some early adopters let their fingers do the walking and used their keyboard and their mouse.

Borrowers ended up with people who said they were loan officers but only pushed paper around. Not surprisingly, loan officers did not know what they were doing. They did not know Fannie Mae, Freddie Mac, FHA, VA, and Jumbo guidelines.

When the rest of the market quickly followed with low origination fees and low cost loans, the loan officers who knew what they were doing could not get a loan if their life depended on it. The companies also had to hire loan officers who did not know anything so that they could make more profit for themselves and less for loan officers.

In the past, loan officers were commissioned employees. In other words, sales people on one hundred percent commission.

With smaller profits per loan, the only place left for them to go was sub-prime, alt-A, and borrowers who could not qualify the regular way. Alternatively, they could make less money.

These professional salespeople found they made more money. They told their friends in the mortgage industry and as the sub-prime market began to grow, and were rewarded with rich profits. Companies in this market hired new employees that did not know anything but to be commissioned salespeople, in both the retail (direct-to-consumer) market and the wholesale (mortgage banker to sub-prime loan officer) market.

In 2000-2002, the bottom fell out of the stock market and some folks who got their money out quickly decided to make more money the old-fashioned way - in real estate.

Boom!

Values sharply increased and lenders were right there to snap up the financing. These money people wanted to put as little money down as possible and they wanted things to be as easy as possible. They wanted no qualifying.

Some folks saw their values increasing and took cash out to invest in real estate, too. Or, more real estate.

The little guy got taken along for the ride, and the loan officers who had not been through the early eighties believed what they were saying, "real estate values will always go up."

And, they have (until now).

There are statistics and graphs to prove it. Until recently, the median price (nationwide) has always increased on a year-to-year basis - until now!

How do you fight it? In those states that require licensing, ask what percentage of their loan officers are actually licensed, and make sure you see the license when/if you meet them.

Otherwise, get three lenders and have them all to work off copies of the same appraisal.

    

Because of the change in real estate market conditions, more sellers are competing for fewer buyers. So once again, it seemed important to challenge a long-standing "myth" of real estate.

"The initial listing price isn't that important because the price can always be adjusted down later."

Many homeowners believe this.
It is a myth.
Not true.

If most buyers first viewed your house because of a newspaper ad, a magazine, the internet, brochures, or the sign in your front yard, the initial listing price probably would not make a difference. The house would always be "new" to those seeing it.

But most buyers do NOT come to your house because of various types of advertising. That is the another myth.

Sure, buyers call on an ad, they often LOOK at that house, but not always. Once they talk to an agent, they may discover it isn't what they need (or want) at all.

However, they ARE talking to an agent. That agent knows the current inventory and will know of other property that DOES fit their needs.

Those are the properties that buyers look at, and THIS is how most buyers end up looking at your house, too. Because of other agents, not because of your ad.

Hardly anyone buys the house in the ad.

As a result, you need to get other agents interested in your property, and this is where your listing agent comes in...and why a good listing agent is extremely important. The listing agent gets buyer's agents looking at your home.

Those agents have clients who called in on other properties.

Buyer's agents are not swayed by advertising. They look at the needs of the client, where the client wants to live, location, condition, and other details of the property...
And most importantly....
...price.

If your house is overpriced, agents are going to show similar homes that are priced more attractively. Your listing will get passed over.

Agents pay MOST attention to homes newly on the market. There are fewer NEW listings than current listings. It is easier to keep an eye out for what is NEW, compared to the vast number of current listings.

New listings are on the "hot" sheet circulated in real estate offices. The MLS computer identifies new listings. Your listing agent may hire a service to distribute fliers to all the buyer's agents. There are office previews and MLS tours to showcase new listings. A lot of attention is focused on what is NEW.

With agent's looking at newly listed homes so aggressively, a properly priced home gets attention.

An overpriced home gets passed over.

You may be thinking, "But I'm willing to negotiate!"

Buyers aren't thinking in advance about how much you are willing to negotiate. They are comparing your asking price to other asking prices.

Plus, when your house is new on the market, you may not be willing to negotiate as much as you will later, once you've realized your error. Keep in mind that statistics show, quite often, the first offer is the best offer.

So what happens if you overprice in the beginning and get more realistic later?

You don't have all those important Buyer's Agents looking at your listing because it is NEW. A price reduction later in the listing cycle often gets overlooked. It is just one of many listings, not one of a few new listings.

As time passes, you could actually become desperate to sell because you've accepted a new job or because you have already bought a new home.

That is a recipe for receiving lowball offers, so you could end up selling for less than if you had priced the home correctly in the first place.

Agents know this stuff, but many sellers still mistakenly believe they should "price it high" because they can lower the price later, if necessary.

That is not the best strategy.

    

Through the last eight weeks, fixed mortgage interest rates have remained very steady, rising slightly. Most homes unaffected by the weak dollar are sold in Ohio and California. Those states will be hardest hit by the housing crisis. Well, Florida too. Most states. Real estate is local, so contact your local Realtor. The loss in asset valuation may affect mortgage loans and people's ability to qualify for them. As a result, the housing crisis will probably affect spending. Asset spending has been a big part of the economy for a long time. Oh, yes. We have not forgotten high fuel costs (something we have commented on for months) (...and months). As folks spend more money on gasoline and energy, they are less apt to spend that money on other things. Hey, I'm not Miss or Mr. or Mrs. "Gloom and Doom" here. It is just that some parts of the economy do not look good right now. If you have known someone who has been to Europe lately, ask them about the Euro. Heck, even the lowly Yen has scored twelve year highs against the dollar. Actually, a "weak" dollar helps the U.S. economy by making our exports seem cheaper. Now if we could only get rid of excessive import fees, our own desire to over-regulate, and more. We borrow from China. We "global economy" the life out of China, India, and the rest of Asia. If we did not have millions of people from Mexico, Central America and South America here, most of the "cheap stuff" would cost much more. We are talking about interest rates because the economy is interest rates. And inflation. So will inflation rear its ugly head in America? Well, it may go higher than it is right now. That's safe. Isn't it? Fixed rates on mortgages may go up a little, then stabilize. Then they should head up a little more. No one can guarantee economic or interest rate predictions, of course.

    

Home Sales Up

Sales of existing homes in the USA went down by 1.99% last month, from 5.03 million homes to 4.93 million homes. That's a little more than December, but well below last March (2007), by 19.31%.

Sales Pace by Region

For month to month changes, sales in half the USA was up and half of it was down.

In the Northeast and West, the sales pace was up by 2.25% and 2.17%, respectively. In the Midwest sales were slower by -6.45% and in the South they were down -3.52%.

Nationwide though, the sales pace was down by -19.31% compared to last year. The regional declines were: West -22.31%, South -20,00%, Northeast -18.75%, and Midwest -15.94%.

Next Report & Definitions

April sales pace figures will be released at the very end of May.

This measure tracks units - condominiums, co-ops, and single family home. What "sales pace" means is that the National Association of Realtors calculates how many homes were sold, makes adjustments for seasonal factors like weather, school, vacations, then calculates how many homes would sell in a year at that given pace. When we use raw data, we try to state that clearly.

The median average is the "midpoint" sales price. Half the homes were sold above that price and half below.

Home Prices Fall

Nationally, the median average sales price fell compared to last year, down nationally by -7.68%, to a median average of $200,700. The Northeast showed a slight gain of sales price to 4.56%, while the rest showed drops — West -14.72%, South -7.06% and the Midwest by -5.33%.

We compare values to the same period a year ago. We do not use month-to-month comparisons because there are sometimes huge fluctuations in the size of houses that sell in different seasons. Larger houses sell during the summer when it is more convenient for families to move.

Inventory Up

It would take 9.9 months to sell all the homes currently available on the market. That is up, and you can blame most of that on a slower sales pace. Although, there were actually 40,000 more homes available for sale, a total of of 4,058,000 homes. That's way too many for this market.

Inventory is measured in two ways. "How many homes are available for sale?" and "How many months would it take to sell the total number of homes available for sale right now, at the current sales pace?"