BraySpace

How low can they go?

This will not be a long explanation for those of you who would like one.  The reason for this post is because it is a questions that we in “the biz” deal with on a daily basis from our clients, co-workers, industry related professionals, people standing in the street, and our mothers.

If we had crystal balls, there would not have been a housing “bubble” in 2004-06.  Likewise, we would not have the low rates that we have today.  Everyone would have seen what was coming and the low interest rates to follow.  Therefore, people would have waited.  Sayonara bubble.  Sayonara to the need for low rates.

The bottom line is that the Feds have to keep rates low until we see signs of a strong economic come-back.  In  particular: JOBS.  It’s hard for anyone to buy a home unless they have a job that supplies them with the money to pay for it.

Will they go lower? It would be tough to imagine that they could.  4% is already the lowest ever recorded in the history of interest rates and it is putting pressure on banks that are used to enjoying rates around 7.5%.  Moral of the story: If you can buy a home now, live as Nike lives.  Just do it.

Did the government really sneak a piece

of legislation in with the healthcare bill

that includes a 3.8% sales tax when selling my home?

Short answer: Yes

Long answer:  It is true that the government did include a proposal in their healthcare bill that would tax a person or couple 3.8% on the sale of their home.  However, the fine print here states that it will affect very few of us.

This will be bad news for sellers who make over $200,000 personally or $250,000 as a married couple.  Especially if they make a net gain on the sale of their home of $250,000 if they are single or $500,000 if they are married.  (P.S. The 3.8% sales tax is on that of the *gain* and not on the total sale amount of the home.)

If you aren’t one of those people, this bill will not be a part of your life in the least.

Scenario of those who will be taxed:

• A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
• An “empty nester” couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.

Scenario of those who would not be taxed:

Everyone who make under $200,00 as a single person or $250,000 as a married couple and sells their house for less than a $250,000 or $500,000 gain.  In other words, almost everyone.

To make a long story short, by the time this tax hits the real world in 2013 (that’s right, it’s not even in working order yet) only 2% of American families can expect to take part in this piece of the bill.

*For more information on this, click here

What Does “The Freeze” Mean for Us?

The Situation: No, no.  I’m not talking about The Jersey Shore here.  I am talking about the “Foreclosure Freeze” taking place in various states around the U.S.  If you haven’t heard yet, the housing market has, yet again, taken another strange turn into the unknown. According to an October 6th post on the KCMblog, “Because of the flood of foreclosures needing to be processed, there were employees who signed off on thousands of foreclosures attesting to the accuracy of the documents without having much personal knowledge of what they contained. These employees became known as ‘robo-signers’. It now appears that hundreds, many thousands of homes might have been foreclosed on without the proper procedures being followed.”  (click here for full story)

As you can see, this creates quite a problem in the eyes of the government.  The politicians called for an industry-wide moratorium on foreclosures until some of these banks can prove that their process of foreclosing was both ethical and legal.  Bank of America announced its freeze on foreclosures in all 50 states while other banks have announced the same in 23 others.

If you’re buying a foreclosure: If you are buying a foreclosure, anticipate potential delays.  I do not believe there will be numerous cancellations of purchase agreements, however.  The important thing is to realize that you are getting a substantial savings on the purchase even though the process may be a bit tedious.  Be prepared for an example like the one reported last week in the Washington Post if you’re purchasing a foreclosure.  That article recalled a situation as “Nick Chaconas, a Maryland real estate agent, said he was one week from completing a foreclosure deal for one client, who was buying a $470,000 fixer-upper in Potomac, when an e-mail arrived putting the deal on the skids. The e-mail, from the title insurance company involved in the deal, said the mortgage lender PNC was suspending foreclosure sales for at least 30 days ‘”due to a review being undertaken on all foreclosure files.”‘

Just a heads up.

If you’re selling your home: If your home is in foreclosure, it would be worth a call to your mortgagor to see if they are actually taking the right steps AND also check to see if your home is one of the “frozen” ones.

If your home is NOT in foreclosure, this may actually be the silver lining in all of this.  If banks aren’t able to put foreclosed homes on the market due to them being frozen and all, surprise surprise….there will be less foreclosures on the market.  Yip-eee!  As noted by RealtyTrac, bank-owned homes sold for 35% less than traditional sales last year.  As is the case in most supply and demand situations, the cheapest items sell first.  With a few of these foreclosures off the market and no more coming on while they figure out this mess, there may be a window of opportunity for a seller to maximize the price they receive for their home if they sell in the next 90 days. No promises, but this makes sense.

What does this mean for the market in general?: It’s really tough to say at this point.  My estimations are along the same line as the Washington Posts’ article last week stating “It would not help the recovery of the economy, or the real estate market, if the foreclosure process became so hopelessly tangled that banks and investors effectively lose the ability to recoup the remaining value of their collateral. That would provide some immediate financial relief to households facing foreclosure, but it would encourage many more homeowners to begin shirking their mortgage payments in the belief that they would also be able to avoid the consequences. The long-term consequences of that would be that mortgage rates would be higher and mortgage loans would be smaller and harder to get.”

I think this could be a good thing for sellers in the next 3-5 months due to less competition from the foreclosure markets.  However, as Steve Pearlstein said in the above excerpt, the long-term damage of this crisis could prolong the flood of foreclosures and even make it worse.

Question: If you hold back water with a dam, what happens when that dam collapses?

Answer: Flood.

Geoff Bray of Roger Fazendin Realtors announces the

Year End HD TV Give-Away

How to win:

• Purchase a home or sell a home with Geoff Bray of Roger Fazendin Realtors between October 15, 2010 and December 15th, 2010 and your name will be entered into a drawing for a 42″ HD television.  No strings attached!

*Purchase and/or sell is defined as completing an executed purchase agreement between October 15th and December 15th of 2010.  The closing date can take place after those dates, but a successful closing must take place to be fully eligible for the drawing.  Geoff Bray of Roger Fazendin Realtors must be your licensed real estate representative to be fully eligible for the drawing.

What’s my best chance to win? Selling AND buying a home would enter your name into the drawing twice.  Two chances are better than one!

What kind of TV will I win? If you are the winner, your choice of either a 42″ Panasonic 720P HD-TV or Vizio 1080P HD-TV will be delivered to your home no later than December 30th, 2010 or within 3 days of the successful closing, whichever is later.

This guy knows what he’s talking about!

“If you don’t own a home, buy one. If you own one home, buy another one. And if you own two homes, buy a third and lend your relatives the money to buy one.”

– John Paulson 9/27/2010

So who is John Paulson and why should I listen to him?

He’s one of the few people that bet against sub-prime mortgages before the collapse of the the market.  That alone lets me know that this guy is smart and knows how to read the future of the housing market.  Just as KCM Blog says, if HE thinks it’s a good time to buy a home, then you’d better listen to him.  I bet there are a lot of people that they had wished they listened to him the last time he made a prediction.

According to Forbes John Paulson is:

a multibillionaire hedge fund operator and the investment genius who made a killing going short subprime mortgages a few years ago.

According to the Wall Street Journal Paulson is:

a hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.

via If HE Says It Is Time To Buy a Home, BUY A HOME!.

Remember the good ‘ol days?  I don’t.

We’re living them now.

Check out the average interest rate of when your parents bought their first home.  (If you don’t know what year that was, just take a look around the year you were born)

I am one of those who doesn’t know exactly when my parents bought their first home, but if I look near or around the time of my birth, it looks like mortgage interest rates were in the “teens.”

Good ‘ol days?  Seriously?  How good could a market have been with interest rates around 15%?  The average rate for 2010 is just under 5%.  On a $250k home, that’s a rough estimate of nearly $1,700 in savings on your principal and interest.  All of a sudden, this market isn’t looking as bad as (they) are telling me it is.

I think I would rather buy a home in today’s market than back then.  What do you think?

Where are rates as of 10/1/2010?

• 30 year fixed              4.125%
• 20 year fixed              4.00%
• 15 year fixed              3.50%
• 10 year fixed              3.75%
• 5/1 ARM                     3.00%
• 7/1 ARM                     3.375%

(Interest rates courtesy of Bob Strandell and Bell Mortgage)

Although you won’t find this list on David Letterman’s Top 10, I would still consider it to be significant

• 10.) You can get a good deal: Everyone knows it’s a buyers market.  Haven’t you ever heard of “buy low, sell high?”
• 9.)  Mortgages are cheap: With interest rates in the sub 4′s, you can’t afford not to buy a house.  In a lot of cases, it’s cheaper than your rent….fool.
• 8.)  You’ll save on taxes: You can deduct your mortgage interest.  You can deduct your real estate taxes.  You can deduct your intelligence if you don’t take advantage of this.
• 7.)  It’ll be yours: Make the kitchen just the way you want it.  Paint the living room purple and gold (Go Vikes), or just do whatever else it is that makes you happy without your landlord breathing down your back.
• 6.)  You’ll get a better home: It’s tough to find nice rentals.  For the most part, renters don’t take care of their dwellings as well as owners do.  If you’re next in line to rent, make sure the carpets get cleaned.
• 5.)  It offers some inflation protection: When looking through past records, housing has tended to beat inflation by a couple of percentage points a year.
• 4.)  It’s risk capital: When the economy does bounce back, you’ll be sitting on a good “stock” that is always in demand.
• 3.) It’s forced savings: Pay a little more in that mortgage than you would for rent.  Paying yourself in the future by building equity.
• 2.)  There’s a lot to choose from: Yesterday, there were 376 new listings added to the 13 county metro area Multiple Listing Service (MLS).  Multiply that by 7 and that’s a lot of new homes to see every week.  Finding the right one for you is not as hard as you may think!
• 1.) Sooner or later, the market will clear: The storm will pass.  As I tell most of my clients that purchase homes, if prices don’t start going up in the next 10 years, our home values will be a lot lower on the list of concerns.

There are going to be some tough headlines written about the housing market over the next several months. They may create apprehension and in some cases outright fear. The good news is these headlines will not reflect what is actually taking place in real estate.

via Don’t Pay Attention To the Scary Headlines Coming.

A true sign of the times places Realtors in a better position to help you market your home for rent

You may have noticed an article in the Minneapolis Star Tribune yesterday entitled “Using a Realtor for Your Rental.”  You might also have thought to yourself after reading that headline, “I thought they already did that.”  You were half right.  Some realtors have been doing this for years.  If you go to the east coast or to a bigger city like Chicago, licensed Realtors have been helping people market their homes and condos as rentals for years.  It hasn’t been until recently with the tough sellers’ market in the Twin Cities that the concept has become popular here.

So, how are Realtors going to help people rent their homes?  How will this be better for you than just putting it on Craigslist or something similar?  I’ll tell you.  The biggest benefit is going to be to those owners who want to sell, but would also be open to the idea of renting their home out.

As of next week, NorthstarMLS (the multiple listing service for the 13 county metro area) will be listing rentals alongside homes for sale.  This gives sellers the opportunity to market their homes on the MLS for either sale OR rent.  A novel concept that allows them to take whichever option comes their way first.  According to the Minneapolis Star Tribune “the addition of rental listings has been motivated largely by agents and brokers, who have asked for a centralized database of rental listings to cope with the growing number of shoppers who aren’t willing to make a long-term commitment to a mortgage.”  Up until now, if you were to ask an agent to help you find a house to rent in the Twin Cities, most of them would point you to rent.com or craigslist.  Now, we can help you find a home or sell a home for rent with the same ease as we can if you wanted to purchase or sell.

So, what are the main positives and negatives of this change in our marketplace?

Positives:

• It’s no surprise that the market has scared off some buyers or made it difficult for them to obtain credit during the “crunch.”  This could open up a whole new opportunity for sellers to move and not loose as much money after selling for less than they may owe and paying realtor/title/mortgage pay-off fees.
• The data-base has been centralized.  Imagine a world where you could call a Realtor and within minutes, they could email you every rental that fits your needs in the area you want to live in.
• You get ethical and official representation in understanding your lease and rules of the associations.  Also, have you ever thought of negotiating the rent?  Realtors can do that for you.

Negatives:

• Sellers, if you’re not ready to be a land-lord this is not for you.  If you’re not ready for a 3:00am wake-up call because the security alarm accidentally went off or the basement flooded, I would suggest that you stay on the track of selling your home rather than renting.
• Buyers, there may be some fees involved.  Although, much like the seller pays for the buyer’s agent commission in a purchase, it may become typical for a land-lord to pony up the first month’s rent for the agent bringing them a renter.
• Not everyone is going to buy into this right away.  Most land-lords may want to keep doing things “their way.”  Where I see this really taking off in the near future is for sellers who are open to both options of selling or renting.

A true sign of the times.  Buyers not wanting to pull the trigger.  Sellers afraid of loosing money in their investments.  Banks not giving out loans as easy as they used to.  Consider your Realtor now a hybrid version of their former selves.  There are a lot of nay-sayers out there when it comes to the ethics in real estate claiming that realtors are just out for the commission.  Yes, there are some of those still out there.  But for the most part, this new market has done some “weeding out” of the business.  Now, the good ones that are left have one more tool in their belt to help you.