Home Buyers Relocation’s Weblog

Could this be the time to buy?

The following article is quoted in its entirety.  It was written and published by Amy Hoak, in Market Watch, recently.  It’s a great summary and we generally agree, except that the comments about new home construction does not prevail in our community.  That was worked off a year ago.  Builders are back to building “inventory” homes, but they are not ahead of the real market at all.Could this actually be the best time to buy? It may be moment you’re looking for By Amy HoakMarketWatch CHICAGO—People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall.  But if you’re brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime. Ask for price reductions, improvements, closing costs—whatever—and the seller, desperately trying to get a contract, is very likely to work with you, said Jay Papasan, one of authors of the book “Your First Home.”  When the market starts improving, your negotiating power starts to diminish, he added. If you’re qualified to buy a home now, the purchase makes sense for your situation and you’re prepared to live in that home for at least five years, there are reasons why you may be headed for a great deal: 1.  Affordability is better than ever.According to the National Association of Realtors’ housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970.  The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income. John and Julie Chilman, for example, recently have been able to stretch their dollars in the

Las Vegas area.  The listing price for the five-bedroom home they’re buying was $265,000; they offered $250,000. “Our Realtor was like `Yeah, pipe dream. Like they’re going to take that,’” John Chilman said.  “And all they did was counter $255,000 … and they’re paying all closing costs.” The home had lingered on the market, and was listed for $310,000 just six months ago, he said. 2.  You have a large inventory to choose from.In many places it is taking months to sell a home, creating loads of inventory — from new homes to existing homes to foreclosures.  There was a 12.9-month supply of inventory in December given that month’s sales pace, according to NAR.  A large selection gives buyers more choices and drives down prices.  And home sellers have gotten the picture. 3.  Builders are offering big discounts.Homebuilders are getting even more aggressive with their pricing.  In fact, Fadel recommends looking at completed new homes first because builders are offering such steep discounts.  Plus, you’d have a warranty not only on the home itself, but also on the home’s appliances, he said. 4.   Mortgage rates are historically low.It’s not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. 

The Perfect Rainbow, Revisited

This is a re-work of a letter published here last fall, but the sentiment is so appropriate, I thought it justified an update. Of course, you will recall the popular movie of a couple of years ago called The Perfect Storm!   It was an unlikely but memorable name, and The Perfect Rainbow is a lot more positive!  And this is not to say the storm we have had was perfect, but it was a pretty darned good one. So it’s good that we should expect a pretty-darned good rainbow. And that’s what we believe prevails, market wise, so it’s an appropriate analogy.  It’s a bit counter-intuitive, because the media and others have installed high levels of wariness, but we do not recall circumstances any more promising in recent years, and the surge in the market so far in 2010 says that many consumers feel the same. 

·        There is good inventory fromwhich to choose.

·        The values are stable and realistic, and not likely, it appears, to go lower.

·        The asking price versus selling price ratios are getting smaller.

The competition is not yet outrageous, but building.

• Money is easily available, at all-time low rates, (but rates appear anxious to rise.)
• The affordability index is at an all time high.

 

(please pardon the disparity of button size above….I can’t get them = for anything!)Of course we would more than ever recommend great care in buying; to minimize risks and maximize enjoyment and resale.   That is where we come in.  

But we’re envisioning historically “best times to buy” that may not return even in (some of our) lifetimes!   If you want to talk about it with me, use 800-231-5588.

 Merrill Ottwein

New market study and important links.

Here….we simply have two new references for you, to help follow the real estate markets in southwest

Illinois.  And, until we find a place for it on the main site, a new school tool, especially oriented toward the military family.  Here they are: www.YourIllinoisHome.com is a site provided by the Illinois Association of Realtors that follows market trends and has great comment about home buying in general.This is a site produced by the Office of Federal Housing Enterprise Oversight.  They are the government folks that are in charge of the recovery, supervising Fannie, Freddie and all those new tax dollars.  Here is their site, if you have an urge to look inside the whole.   If the URL of the link above doesn’t work, it is www.ofheo.gov/newsroom.aspx.

A great school survey, especially for the military family, is being provided by our friend Cindy Doil, (Rotary-friend that is, our outgoing, wonderful president.)  This should be Cindy’s link, but the url is www.Webpages.charter.net/cdoil.

Then, it was interesting to see that Family Circle magazine, in bestowing the honor of the 3^rd best city in the

USA upon Edwardsville this last week, used

www.greatschools.com for their school data.Thanks….Merrill

The following is now outdated, but we’re keeping it “up” for the moment because military families who have been overseas for 2 years or longer have another year in which to claim the rebate.  If they close by the end of June in 2011, they can still claim it.  Call our office for details if you believe you qualify.

This therefore is old stuff: 

The purchase deadline for first time buyers to reap the $8,000 tax credit is just around the corner, considering it’s harder nowadays to get around the corner!

While this site is intended primarily for existing home buyers that have been clients of ours in the past, and so are homeowners already, almost everyone knows of potential first-time buyers among family and friends, and those are the ones for which this message is intended.For them, the ticking sound is the sound of time creeping up on the expiration of the $8,000 tax credit for first time home buyers.Of course, it is only July and the credit does not expire until Dec. 1.  But unless the federal government decides to extend or expand the credit – kind of a long shot — it may be time for potential first time buyers to get the process started.

First, remember the rule:  it is not that a contract must be signed before Dec. 1 or a loan approved by then. The sale has to close before Dec. 1.But even this scenario is tempting fate, but we believe buyers should have a purchase contract signed by mid to late September, so they have 45 to 60 days to safely close the purchase.  Buyers who want to be in a new home by Thanksgiving need a contract by mid September for sure.

Under normal circumstances, buying a home is a complicated process, particularly after the fun of looking at potential homes descends into financial minutia.  The process is normally difficult, especially for first time buyers, who have not been through the process before.

But that process has become much more laborious in these times.   We have seen all kinds of surprises in the appraisal and lending processes.   One simply cannot count on the old timetable.   New appraisal rules have kicked in and we are seeing St. Louis and other out-of-area appraisers groping for local data and statistics, and taking lots of time.  Lenders are taking lots more time and are being super careful about everything.  Also, it can take significantly longer to get an answer back on an offer for a distressed property than a traditional one.  It seems that everything is dragging out and taking longer.

And we want to be very careful ourselves in supporting the search process, making sure that all viable options are considered, and a comfortable confidence is built.   We still want the usual careful analysis of resale potential for all finalists.

The bottom line is that it is not too early to organize the search and get the financing efforts started.   These two functions need to be considered as on parallel tracks, merged at the moment necessary after the search identifies the single best option. 

In fact, some kind of commitment from a lender needs to be in hand before offers are made.  That is a most important tool for us in making the offer look good to the seller. (Sellers are more careful nowadays, too, as they want a deal that really closes, and closes on time.)  So financing surety up front goes a long way, in building buyer confidence, in making it easier for the sellers to say yes and for the whole process to go smoothly.

Then finally, there is little doubt that the $8,000 incentive is working as intended.  All of us in the business have seen a growing interest in taking advantage of that, so many in fact, that last minute congestion at the closing offices (title companies) could even be a possibility.

So we surely do not mean to be discouraging.  We just want to say that under these modern circumstances, it could take longer than usual to close on a transaction, so it is not too early to get it started.  And while it may be formidable, we are there to make it safe and comfortable.   Like a lot of our most challenging lifetime efforts, the reward will surely be worth it!   We hope you might convey this sentiment to family and friends that are in a position to take advantage of the incentive AND get into a new home by Christmas, or even, Thanksgiving. 

The following is a verbatim copy of an article that originally appeared in the wall street journal (in ‘Smart money’).  It’s presented here because it has good advice for 1st time home buyers, but it also, in paragraph 4, advises they should use an “Exclusive buyer agent”, and links to the national association of exclusive buyer agents, (in paragraph 4.) That’s significant because merrill was a founding member of this organization, its first treasurer and its fourth president.  (Also see “About us” for more detail.) 

Deal of the Day by Deal of the Day by Lisa Scherzer (Author Archive) 10 Mistakes First-Time Home Buyers MakeThe declining home values that are plaguing homeowners are just one of the factors creating an opportunity for prospective home buyers. Standard & Poor’s latest Case-Shiller index, which tracks home prices across 20 major U.S. cities, reported that values dropped 19% in January from a year earlier.Those depressed values, combined with near-record-low mortgage rates and government incentives (an $8,000 first-time home buyers’ tax credit included in the stimulus bill), are luring more first-time home buyers into the market. Indeed, a recent Century 21 Real Estate survey found that more than three-quarters (78%) of potential first-time home buyers say now is a good time to buy.If you agree, be aware that buying a home comes with plenty of potential missteps. Here are 10 all-too-common mistakes first-timers make.

1. Not knowing how much house you can afford.Many novice home buyers spend a lot of time researching homes – comparing kitchen layouts and backyard square footage – but very little time researching their financing options. One of the first things buyers should do is talk to a qualified lender and get pre-approved for a mortgage, says Claire Clark, senior vice president of business development at Prudential California Realty. Without first figuring out how much house you can afford, you risk falling in love with one you can’t.

2. Assuming foreclosures are great deals. Just because the previous owner owed $450,000 on a house before the bank took it over doesn’t mean it’s worth that much now. Values have slipped significantly, says Jay Michael, partner at Estate Property Group, a

Chicago real estate brokerage, so you may not be getting the bargain you think with a foreclosure. Also, most homes owned by lenders or banks have been sitting vacant for months and may have been vandalized. That could require extensive renovation or repair. Weigh the costs of fixing up the property against the savings you’ll likely reap by buying a lower-priced foreclosed home.

3. Letting your true feelings show. No matter how much you’ve fallen in love with a house, don’t let the seller’s agent in on it. Otherwise, they will gain the upper hand in negotiations.

4. Failing to find a good buyer’s agent. Landing a mortgage is tough these days. So buyers should rely heavily on knowledgeable agents to help them get their finances in order, says Michael. After all, buyer’s agents have a fiduciary responsibility to the buyer exclusively — and should be looking out for their best interests. Start your search at the National Association of Exclusive Buyer Agents, a nonprofit representing buyers (exclusively.) Or consider using an agent recommended by a relative or friend. Interview each candidate about their experience, if they’ve worked with first-time buyers before and what kind of service you’ll get from them.

5. Underestimating the costs of owning a home. Whether it’s a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many home buyers don’t anticipate the additional costs for repair and maintenance, or for an increase in utility costs, says Erin Baehr, CFP and president of Baehr Family Financial. Consider the age of your new home and how well it’s been treated by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home’s purchase price annually for repairs and upkeep.

6. Failing to budget for property taxes.Property taxes – and the likelihood that they’ll climb over the course of your time in the house – should be factored into any home-buying budget, says Baehr. To get an idea of how much you’ll be paying, call the local assessor’s office or talk to people in the neighborhood.

7. Assuming your first offer will get accepted.As home prices get even more affordable, competition is bound to heat up. “You can’t assume you’ll walk in there, make the offer and get it,” says

Clark. Try not to get discouraged if you lose out on the first – or second – house you make an offer on.

8. Skipping the inspection.Before signing anything, hire a professional inspector, says Justin Lopatin, a mortgage planner with American Street Mortgage Company. The seller isn’t likely to tell you there’s mold in the basement or the walls are poorly insulated. Lopatin advises buyers to find and hire their own inspector – independently of the realtor – to ensure there’s no conflict of interest. (You can find inspection companies in the phone book, or by doing a simple web search with your zip code.)

9. Doing too much too fast. Some buyers want to make the house their own right away, says Baehr. They overextend themselves on credit to do so, and assume the improvement will pay for itself by increasing the home’s value. But that’s not always the case – especially in today’s market. Instead, buyers need to exhibit patience and make changes over time.

10. Failing to include a contingency clause in the contract.A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in under the purchase price. Should one of these events occur, the buyer gets back the money he used to secure the property. Without the clause, he can lose that money and still be obligated to buy the house, says Lopatin.(Corrected April 6, 2009: As originally published, we stated that a contingency clause protects home buyers if the appraisal comes in above the purchase price. In fact, protections kick in when the appraisal value is under the purchase price.)