Is Today a Good Day to Buy or Sell a Home?

THE FOLLOWING ARTICLE APPEARED IN THE JAN. 29, 2011, EDITION
OF THE RIVERSIDE PRESS-ENTERPRISE.

Distressed properties are piling up by the millions, threatening to delay the nation’s economic recovery and the next upswing in the real estate market.

But combined with historically low interest rates and the current supply and demand, that pent-up supply has created a sweet spot in the market for buyers and sellers.

Standard & Poor’s reported this week that the volume of homes likely to hit the market as either foreclosures or short sales grew to $450 billion as of the end of the third quarter of 2010. This “shadow inventory” – which S&P defines as properties 90 or more days late on their mortgages; properties in foreclosure; and lender-owned properties not yet resold – is expected to take 44 months to clear out.

“Our estimate for the average time to clear these properties in the U.S. has increased by about 25 percent since the start of 2010 and increased 7 percent between the second and third quarters,” S&P reported.

“Experts” are all over the spectrum on predictions for the future. Economists from Fannie Mae, Moody’s, S&P, Wells Fargo and many others predict price drops in 2011, at least nationally. Meanwhile, the National Association of Realtors predicts prices to remain flat this year.

With so much conflicting information, how should homeowners and potential buyers proceed?

SELLERS: If prices do decline again in a double-dip, sellers need to make their move now, before the competition grows.

A flood of homes to the market could increase competition among sellers and drive down prices.

For sellers with equity, that’s bad news because it translates to less money in their pockets at the close of the transaction.

For distressed sellers, it’s worse because the risks are greater – a bump in the road and the loss of a buyer could result in a financially devastating foreclosure that would keep someone from re-entering the housing market before the next big run-up in prices.

And for homeowners with vacant properties on the block, it could mean a continuation of dead lawns, squatters and vandals in the neighborhood.

BUYERS: People thinking about jumping into the real estate market face a trifecta of confusion: uncertainty, fear and the thrill of the past upswing.

The recent soar and plummet of the real estate market took us to unchartered territory. It shifted the way Americans think when it comes to buying a home, and that notion of “buy low, sell high” pierced so deeply into the core of the nation’s psyche, that suddenly, everyone was a real estate “investor.”

But many paid a heavy price in that arena.

That’s why home buyers today should be focused on the “cost” of home ownership instead of the price of a house.

Interest rates are at historically low levels, but they have increased more than a half-percent in the past three months. What was 4.2 percent in October is 4.8 percent today, according to Bankrate.com.

Home buyers who locked their rates at the lows of last year and closed their purchases at 4.2 percent on a $200,000 loan would have a loan payment of $978.03. In comparison, a buyer who waited for a 5 percent drop in prices but who purchased with today’s interest rate of 4.8 percent would have a payment of $996.86 on a loan amount of $190,000.

Lower price, yes. And higher cost.

Will interest rates continue to increase, or will they drop back again this year? It wasn’t that long ago that they were higher than 5 percent. Home buyers who focus on price instead of cost could get caught again.

Additionally, the cost to rent a home actually exceeds the cost to purchase in many areas of California. Online real estate tracker Trulia reported this week that in 72 percent of the largest 50 U.S. cities, renting actually costs more than buying. Though the Inland Empire cities of Riverside and San Bernardino were too small to be considered, Long Beach, San Diego, Sacramento and San Jose were all on the list.

The foreclosure epidemic also has also put pressure on the U.S. rental housing market. Property research firm Reis Inc. reported this month that the apartment vacancy rate in the last quarter of 2010 decreased to 6.6 percent from 8 percent a year earlier. And effective rents increased to $986 from $964 a year earlier.

FREE INFORMATION: Whether a buyer, a seller or both, consumers need the guidance of a seasoned real estate broker to help them navigate the complexities of a real estate transaction.

For a free copy of our brand-new Special Report, “Inland Empire Home Buyers: Strategies to get the Best Deal and Beat the Competition,” call 1-800-941-1900, ext. 9403; email PE@DreamBigRealEstate.com, or visit www.DreamBigRealEstate.com.

Or, for a free copy of the Brand-New Special Report, “9 Alternatives to Inland Empire Foreclosure,” call 1-800-941-1900, ext. 9003; email PE@DreamBigRealEstate.com, or visit www.DreamBigRealEstate.com.

(Brian Bean and Timothy Hardin are Realtors and Ambassadors for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. They can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean and Timothy Hardin
Real Estate Professionals
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

 

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If one advances confidently in the direction of his dreams,
and endeavors to live the life which he has imagined,
he will meet with a success unexpected in common hours.
 

 

Henry David Thoreau

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  1. March 15, 2011 at 6:07 pm

    Interesting article. One of the things I have been concerned with is the strain that oil will put on the economic ”recovery.” Even though these one off situations like Egypt, Saudi Arabia, and Japan will have a short-term effect, the long-term trend is what I am most concerned about. What is interesting is that in several areas that have been hit hardest the following circumstances are all happening at once.
    In most of these areas (Phoenix, Las Vegas, Inland Empire) , housing prices have crashed, leading to underwater houses and eventually foreclosures. Unemployment has skyrocketed in these areas as well. Now that prices have fallen so far and inventory appears to some to be ripe for the picking, investors are purchasing properties for to rent for cash flow. However, as oil picks up, it is becoming clear that many of these desert communities are not sustainable as they rely on cheap oil as many of the cheapest surrounding areas are commuter communities. The uncertainty is tremendous in these markets, yet many investors are jumping in and gobbling up properties.

    http://www.thecashflowisking.com

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