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The Housing Guru Blog has moved to: www.thehousinggurublog.com.  Thanks to all for your continued support.

John

Recent headlines, as well as some of my own blog posts, have some consumers wondering: “Should anyone buy a home in today’s market?” And the answer is a definite, but qualified, almost enthusiastic, yes.  An article in the NY Times, points out some of the obvious benefits of home ownership:

● A mortgage can be a type of forced savings

● Home owners don’t have to deal with the difficult or fickle landlords who may decide to sell or experience foreclosure

● Rental units may not be available in the area in which you wish to live.

And in previous posts I’ve pointed out that home ownership can provide:

● An anchor to the community (Owners are more involved in community, civic, and political affairs)

● Stability (Owners move less often and are more likely to develop relationships with neighbors)

● Freedom (Owners can customize or modify their accommodations as they wish and as often as they wish and will reap the financial benefits of their improvements)

● Pride of ownership (Becoming a home owner provides a sense of accomplishment)

● Security (Neighborhoods filled with owners have less crime, and strangers do not have keys to your home)

● Homes provide a place for family activities (Backyard swing sets, tree houses, or room for family pets)

And while the recession has placed the focus upon the financial risks associated with a home purchase, when purchased wisely, homes can be financially beneficial.  Because of the leveraged factor, a shrewd purchase sometimes offers significant returns.  Unless you are an investor, however, homes should not be purchased for investment potential.

Should anyone buy a home in today’s market?  Yes, but not everyone who is qualified.  There are numerous considerations, and for some a purchase could prove disastrous.  However, those who wish to own a home and who are financially stable should certainly consider their options; and having an experienced buyers’ agent to help locate the best home in the best location, provide expert guidance through the complex purchase process is essential.

The Housing Guru: The expert source for all your housing questions

Home Prices Must Fall

Home Prices Must Fall

Recent news stories reporting the dramatic drops in both new and existing home sales seem to indicate that home prices must fall.  While periods of low interest rates normally stimulate home prices to rise, the lack of demand will keep that from occurring.  The powerful force that will drive home prices down is inventory.  As home sales fall off a cliff, the absorption rate declines, causing dramatic spikes in inventory levels.  The graph from Calculated Risk shows the severity of the current inventory spike.

Housing Inventory


Additionally, there are just too many negative factors weighing on the market:

● Mortgage purchase applications continue to hover at the levels of 15 years ago.

● Overall buyer traffic is the weakest in 25 years.

● The Conference Board survey of those who expect to purchase within six months is at the lowest in over 25 years.

● The “shadow inventory” of potential foreclosures could include as many as 5 million homes.

● The decline in homeownership is expected to continue as it remains above pre-bubble averages.

● High unemployment and tightened lending restrictions has decrease the pool of qualified purchasers.

● Personal bankruptcies have risen, even though the process was made more difficult in 2005.

● Almost 1 million loans current in January are now seriously delinquent or in foreclosure.

● The government’s attempts to alleviate the crisis through loan modification have been an abject failure.


Of course this isn’t good news either for the overall economy or for home owners, but it is a reality that must be factored into our future plans.  And while this news may not be conducive to home sales, it is the reality of today’s housing market; and that is what potential buyers need to know.

The Housing Guru: The expert source for all your housing questions

While some point to the possibility that home prices and sales may once more turn down, the reality is that housing isn’t entering a double-dip; it’s merely continuing its journey. Homeowners or potential home buyers want to know what’s really happening; but the news is so confusing that it’s virtually impossible to tell.   For many the confusion arises from the surge in sales and prices that began last fall and continued into the spring, a time when economists and pundits were quick to call the housing bottom.


Jim Cramer even set the specific date for the bottom, June 30, 2009, telling consumers to go out and buy.

Alan Greenspan agreed and said housing would bottom by the middle of 2009.

Housing Predictor said that most of the market would see bottom between April and June of 2009.

Moody’s put the date a bit farther out, guessing Q-3.

Money Magazine said to wait until the end of that year.

● Late in 2009, the NY Daily News gushed with optimism, “Home prices are nearing the end of a three-year slump and should rise in 2010.”  They based their prediction on the polling of forty-one economists, with all but one agreeing that a bottom had been reached or would be reached within a year.


Many of the positive predictions came about as a result of the Housing Tax Credit, which, in some areas created a buying frenzy with happy sellers raising prices to compensate for the government’s gift.


More recently however, negative voices have been predicting a “double dip” for the housing market.  It’s no wonder that buyers are sitting on the sidelines or that sellers are either elated because “home prices are rising,” or depressed because of the coming “double dip. On Wednesday, an article on HousingWire stated, “Housing’s double dip is here.


However, I don’t believe we’re entering a “double dip,” for housing never truly reached a bottom.  The anticipated stabilization that was to be created by the multitude of recent government programs never materialized.  The additional sales and price increases that resulted from the Tax Credit was artificial and failed to provide the predicted results, doing nothing more than shuffling the year’s sales numbers, while costing taxpayers billions.  There was no wave of “new” buyers, for only a miniscule number of permanent renters were enticed to become homeowners.  No, we need not fear a double-dip; the housing crisis that began in most areas in 2007 is still going strong, and a comparison of the annual sales numbers will quickly point that out.


Certainly we can find comfort if “our” area is doing okay, but the bulk of the country is far from okay.  However, buyers and sellers shouldn’t be fearful of this news of a “double dip,” as if there is some new villainy set to prey on housing.  The market is merely continuing the process of being re-defined, a process that includes lots of ups and downs.  And while no one can be certain of the ultimate outcome, those who pounce on this latest prediction de jour will remain as confused as ever.

The Housing Guru: The expert source for all your housing questions

A new Fannie Mae website, KnowYourOptions.com, provides help and answers questions for homeowners struggling to make their mortgage payments.  With all the confusion surrounding foreclosure, mortgage modification, and short sales, the site can help keep homeowners away from the “vulture” businesses that spring up to take advantage of unsuspecting homeowners.


The recession and housing crisis have caused millions of homeowners to lose their homes through foreclosure, and many of those foreclosures could have been avoided.  While the government may have done a poor job of offering solutions to those struggling to keep their homes, Fannie Mae’s new website, KnowYourOptions.com, changes thatProviding information which had, to date, been unavailable, difficult to locate, or too confusing to understand, the website is an information-packed source for those facing foreclosure.


Homeowners will find a trusted source that lists the many options available to homeowners who may be facing foreclosure.  The website provides informative videos, detailed explanations of each option, and links to related websites.


Those struggling to remain in their homes will find information on: Refinance, Repayment plans, Forbearance, and Loan modification.  Homeowners who find it impossible to keep their homes may still be able to live there through a “deed for lease” program that transfers ownership to the lender in exchange for release from the mortgage contract, and then leases it back at an “affordable” rent.  Other options for leaving include selling the property through a short sale or transferring through a deed in lieu of foreclosure.


The site offers additional information on avoiding foreclosure as well as a through explanation of the consequences of foreclosure. Struggling homeowners should visit KnowYourOptions.com prior to making their housing decisions, avoiding those commercial sites which “guarantee” foreclosure help, many of which offer nothing but financial ruin.

The Housing Guru: The expert source for all your housing questions


We’ve all heard the news reports about the potential for a double-dip in housing, and perhaps, the overall economy.  Unemployment seems out of control; debt levels are becoming unmanageable; and many are wondering what the future holds for the housing market.  Where home prices going and what is the potential for prices to recover to the levels of 2005/2006?


There are lots of opinions, but here are some points to consider:

● The recent meeting to discuss the future of housing, including the GSEs Fannie and Freddie, while generating lots of news, was not expected to produce anything of significance that would improve the situation in the short term.  The billions of taxpayer liability associated with Fannie and Freddie—extreme “worst-case” estimates range as high as $1 trillion—cannot be erased.  And if the structure of these entities is significantly changed to remove risk to taxpayers, interest rates will increase and home sales will suffer.

According to many experts, structurally high unemployment will be with us for years. And, those without jobs or who are underemployed lack the financial ability to purchase homes.  New home sales follow the employment rate, and with the permanent loss of millions of manufacturing and other jobs, millions of potential buyers have been removed from the housing market.

● Monetary policy seems confused at best.  With disagreement from both inside the Fed as well as among some inside the administration, there seems little doubt that the “green shoots” once reported, have faded and died.  Printing money on a massive scale ultimately leads to inflation; and borrowing and spending has left us deeply in debt, so deeply in fact, that in less than eight years interest on the national debt will equal $1 trillion, the largest single budget item—and a good portion of those dollars will be paid to bondholders in China.

● In the first quarter of 2009, almost half a million small businesses (less than 100 employees) closed their doors, costing about 1 million jobs.  In a struggling economy, such job losses will continue, removing a significant segment of new home buyers from the marketplace.

● The latest foreclosure numbers show that they are spreading into the heartland.  While much of Middle America and the northwest had avoided the worst of the problem, default notices have recently increased significantly, with more than a third of the states experiencing a doubling of foreclosures.


Those who are unwilling to face the reality that the U.S. is in serious economic trouble and that our “leaders” seem unable or unwilling to take the steps necessary to bring about a recovery, may ignore the facts, but that doesn’t change them.  And while economic conditions vary dramatically from one part of the country to another, the economy in general is very ill, and the experimental “medicines” that have been administered have brought only temporary relief.  A long-term cure must be proposed, yet many economists and political observers see that as unlikely.


Proponents of an additional and perhaps larger stimulus have pointed out that current winding down in the economy is due to the effects of the first stimulus wearing off.  What they seem to ignore is the very real fact that a temporary stimulus provides only temporary relief.  The original stimulus, just like Cash for Clunkers and the Homebuyer Tax Credit, did little or nothing to create sustainable economic improvement.  Such artificial measures do little other than to provide politicians with quick, feel-good results intended to demonstrate their commitment to solving the problem; and feel good solutions never last.  It’s time to wean our “leaders” and our citizens from the belief that success must be measured in short term results.


So, where are home prices going? Is recovery just around the corner?  No.  Many years will pass before homeowners feel that the housing market has recovered; and the ensuing period will be fraught with uncertainty and additional foreclosures.  The expectation that home values will quickly return the their recent highs or that prices must continually increase will be replaced by the reality that prices, in general, will follow the rate of inflation.  To do otherwise would mean that homes would soon be beyond the reach of the average buyer.  That’s the reality, and that’s where home prices are going.

The Housing Guru: the expert source for all your housing questions

Negative Housing News

The constant stream of news stories about foreclosures, increased housing inventory, and the virtual collapse of home builders’ confidence may foretell a disturbing trend; and the negativity associated with housing could impact the market for years. Once seen as a solid investment, residential real estate has lost its allure for those who saw it as an effortless means of enhancing retirement savings.  However, with an economy still struggling to come out of the worst recession in three quarters of a century, many have changed their opinion.


Having lost much of its perceived investment potential, housing must now rely to its emotional appeal—a place to create memories grounded in the concepts of home, stability, family, security, and sanctuary.  Not to be scoffed at, many find such values to be worth far more than financial considerations.


However, we all have differing needs and perceptions; and the perception de jour seems to be that housing is a bad investment.  And when analyzed purely for investment potential, housing often comes up short.  While some tout the true values of home ownership, large numbers remain skeptical, remaining on the sidelines, anticipating that magical moment when stabilization returns to the housing market.


With long-term unemployment at record levels, consumer confidence shaken, and an awareness of the significant declines in home prices, residential real estate could be in a long-term struggle as the negativity associated with housing could impact the market for years.

The Housing Guru: The expert source for all your housing questions