Archive for the ‘Real Estate Economics’ Category
The Right Decision for Homebuyers in This Economy?
Posted by Sibet B Freides in Real Estate Economics on April 5th, 2011
According to the NAHB, Congress and the Administration continue to debate potential reforms of the housing finance companies Fannie Mae and Freddie Mac. But will these new policies further destabilize the struggling housing market?
The NAHB believes the proposed rules contain a harshly narrow definition of Qualified Residential Mortgage (QRM), requiring a minimum down payment of 20 percent, which would seriously disrupt the housing market by making mortgages unavailable or unnecessarily expensive for many creditworthy borrowers.
By stipulating such a large down payment for a loan to be considered a QRM, the Administration and federal agencies are appropriating congressional efforts to reform the housing finance system by imposing a narrow and rigid gateway to the secondary mortgage market. But attempts to recover this market with a myriad of dramatic changes across the board may not be the right answer in this economic climate.
While it is understandable that efforts are being made to modernize and stabilize the nation’s housing finance system, this extreme proposal could and would most likely cause renewed stress and uncertainty for borrowers who are trying to obtain an affordable, sustainable home.
A stable housing sector is essential for economic recovery and long-term prosperity.
Private capital must be the dominant source of mortgage credit, and it must also bear the primary risk in any future housing finance system.
Changes to the mortgage finance system should be done carefully and over a reasonable transition period to ensure that a reliable mortgage finance system lasts in the years ahead.
What are your thoughts? How will these proposed changes affect your business? Should Congress be this stringent with first-time homebuyers?
Share your opinions on our blog below or on our Facebook page – we’d love to hear your voice!
Five Ways to Ease Prospects’ Uncertainty
Posted by Sibet B Freides in Marketing, Real Estate Economics, Real Estate Sales, Real Estate Trends on March 28th, 2011
According to the NAHB, newly built, single-family home sales hit a record low in February, declining by 16.9 percent to be exact.
These numbers reflect the continued uncertainty of consumers in the overall economy, not just that housing recovery is hesitating. While the economy is the primary concern of most Americans right now, even qualified buyers are struggling with the challenges of new lending terms and conditions and low appraisal values on new construction.
Here are five ways you can ease prospect uncertainty about buying in this market:
Remind them that interest rates are going up. Because of the low cost of homes right now, there will not be a better time to buy. While they wait to decide, 1/8 of a percent continues to be added to the overall, long-term payment.
Show the comparison of renting versus owning: owning still has a tax advantage as well as all the benefits of making it their own, such as choosing the colors they like and renovating to personal taste.
Change your message. In the past 10 to 15 years we have made buying a home about an investment. Now it goes back to being about a home not a commodity. Interestingly that coincides with the Gen X and Y buyers who don’t care about investment as much as they care about it being “theirs” – about them and their taste.
Engage in conversation with your prospects, over social media and in person. Hear their concerns and address them accordingly. Today’s buyers want personal attention, not necessarily always solutions. They want to be heard.
Use Social Media and give away helpful information, whether they buy from you or not. Social Media marketing allows a forum where you can be the expert go-to person for all your buyers’ questions, worries, and needs.
At Idea Associates, we don’t just put your advertising message out there. We are partners and consultants to our clients reach their goals from start to finish. Let us help you ease YOUR prospects’ minds about buying from you today.
A New Playing Field for First-Time Homebuyers
Posted by Sibet B Freides in Real Estate Economics, Real Estate Trends on March 22nd, 2011
A series of new rules, regulations and policies have changed the landscape of first-time homebuyers, resulting in the buying experience being harder and more expensive.
First-time buyers used to account for 40% of home sales. Now they’re down to 29% and falling, experts say, as first-time buyers confront a steady accumulation of rising fees, costs, and rates. Lenders are requiring larger down payments, and new proposals call for mortgages to become more expensive and limited in size.
This, of course, is in response to the devastating mortgage losses of the last several years. Banks and other lenders lost billions of dollars on subprime and other risky mortgages, and some must now buy back bad loans they sold to Fannie Mae and Freddie Mac.
The window of opportunity for first-time buyers may be closing. Home prices still seem to be near the bottom, mortgages are still cheap and interest rates are still low, but for those who don’t want to wait, here are some new rules for first-time home buyers.
More money down
As housing prices drop, mortgage lenders are requiring larger downpayments on homes.
It’s unlikely that a first-time home buyer can save so much money for a down payment, especially in high-priced markets and might need to consider alternative options to get cash. Buyers may have to be open to co-owning a home: signing up for a mortgage with a co-applicant who has extra cash to put down but wants a stake in the property.
Stay longer
Not only are the days of flip-and-move long gone, but buying a house has become truly a long-term investment. Experts predict very slow growth in home prices over the next 10 years, which means it will take a long time before sellers can make a profit.
For first-time buyers, this means sticking to a home that requires few major projects, which builds equity with the passing of time.
More competition
Over the past few months, investors, international buyers, and downsizing retirees have made a noticeable impact on the market, because they’re paying with cash.
To stand out, first-time buyers may have to present an offer with few contingencies; there’s little reason for a seller to work with someone who requests repairs or asks them to cover the closing costs.
How do you see these changes affecting the first-time homebuyer market?
A Strong Job Market Is The X Factor For Real Estate Recovery
Posted by Sibet B Freides in General, Marketing, Real Estate Economics, Real Estate Trends on February 2nd, 2011
According to a recent SmartMoney.com article, there were a record one million foreclosures last year. Home prices are still falling and underwater properties are at a record high. As the article puts it, “everyone hates homes.”
Whether you’re a buyer or a seller, you hate the home asset class right now. You can’t get reasonable financing for a purchase or you can’t get a reasonable offer. So, does this feeling represent the optimal time to buy a home? The answer is yes if you share the view of investors like Warren Buffet who believe that you should buy when others are fearful. A major problem with this ideology is that the consumer view of homeownership has changed. Purchasing a home is still an investment but buyers today are focusing more on it being a suitable home for their specific desires.
This is where demand comes in, the single most important factor in a recovering housing market. More specifically, this is where a recovering job market is imperative. As the article mentions, there are several factors that are dictating the health of the housing market but the largest factor resides with unemployment. Consumers aren’t going to buy a home without a job and those with jobs will refrain because of a perceived lack of job security. Experts have varying opinions and predictions for the job market. Regardless of what happens, this will continue to be the “X” factor for a housing market comeback.
Investor purchases will not revitalize the market. It’s going to take the efforts of the buyers looking for a place to call home.
Vacation Market Saw A Positive 2010
Posted by Sibet B Freides in Marketing, Real Estate Economics, Real Estate Sales, Real Estate Trends on January 12th, 2011
Local sales data suggests that the vacation home market is coming back in a big way, this according to recent WSJ.com article.
Image From WSJ.com
The NAR believes that the positive turnaround stems from a shift in consumer attitudes. As 2010 saw slight improvements in the economy, economists believe that wealthier buyers regained some of the lost confidence of the recession. While, the positive swing in the market should be greeted with jubilation, the data is not entirely concrete at this moment. The statistics for nation-wide vacation home sales are not tracked throughout the year. The NAR conducts a survey and the results aren’t available until March of this year.
According to the article, 1 in every 10 homes sold in 2009 was a vacation home. The results for 2010 are expected to be greater. A key characteristic to the vacation home market has to do with pricing, not demand. It’s obvious that demand is increasing, but prices are still not the bargains that many cash buyers are looking for. Experts believe that sellers are able to maintain prices due to a lack of urgency compared to primary homes sellers.
Even as the market’s conditions improve, cash buyers still hold the keys to the market. Experts believe that the time to buy is now if you have the cash or can qualify for a loan. An improvement in the market is welcomed news, but as we enter 2011 some experts predict a worsening housing market with the addition of more foreclosures. If the vacation market is based on the attitudes of consumers, it’s pretty fragile. It will be interesting to see how those consumers handle the predicted 10% decrease in home prices for their existing homes in the coming year.
Gloomy Building Predictions For 2011
Posted by Sibet B Freides in General, Marketing, Real Estate Economics, Real Estate Sales, Real Estate Trends on January 7th, 2011
Builderonline.com has some predictions for 2011 and most of them are not positive.
Despite its 10 predictions for next year, Builderonline.com smartly warns that any predictions now should be taken with a grain of salt. There are simply too many important components and major parts to the building industry and if expert predictions were always right, we probably would have had a better idea what was coming in 2008.
Probably the biggest factor that will continue to dictate the health of the real estate market is the unemployment rate. A high unemployment rate and the continuing threat of job losses do little for the confidence of homebuyers who would normally be participating in the market.
Experts also believe that the foreclosure situation plaguing the industry is only going to get worse in the coming year, especially at the beginning. For builders specifically, finding credit will continue to be a challenge and costs are going to increase due to the growing costs of commodities.
A big challenge for the coming year will have a lot to do with company staffing. Those builders who have cut large portions of their staff will have a hard time hiring skilled workers to meet any quick spike in demand. The article references quick push to build homes that took advantage of the tax credit last year. As far as business plans go, tt is predicted that companies will fall into two different camps. There will be one camp that focuses on being profitable now, and one where the goal is to sustain for the coming years. This will have a direct affect on job loss and gain in the industry.
How Do Voters Feel About Home Owner Tax Incentives?
Posted by Sibet B Freides in Marketing, Real Estate Economics, Real Estate Trends on October 11th, 2010
Midterm elections are on the horizon and some of the hottest issues right now have a lot to do with tax incentives that support homeownership.
According to a recent NAHB.com article, respondents to a NAHB commissioned survey overwhelmingly support retaining federal tax incentives that promote home ownership. Approximately 80% of respondents say that the current incentives in place should remain as they have been in effect since 1913.
It’s interesting that those surveyed ignore the Administration’s concern for an increasing federal budget deficit. In fact, 70% of respondents say that would be less likely to vote for a candidate for Congress who wanted to eliminate the home mortgage interest deduction.
A strong 82% of renters that participated in the survey favor those tax incentives that promote homeownership. It raises the question of what might happen to potential buyers if those incentives are reduced or eliminated. The overwhelming response by renters strongly indicates that those with plans of buying a new home in the future will do so with tax incentives in the back of their minds. What will these future buyers do if the tax incentives they were counting on disappear?
It is interesting that 76% of Republicans, 75% of Independents, and 64% of Democrats oppose the elimination or reduction of these tax incentives. There is little doubt that this is an issue that will play a major role in the coming midterm elections.
The House Becomes A Home Again
Posted by Sibet B Freides in Real Estate Economics, Real Estate Sales, Real Estate Trends on September 14th, 2010
The way we view home ownership in America has no doubt changed over the last two years. I don’t think anyone will argue that. What experts are debating now is whether or not the housing market will ever look the same. That is, will home ownership ever be the American dream again? I have talked about this before but as more articles are emerging in relation to the topic, I think it’s a good idea to keep the discussion going. I recommend you read this article from Builderonline.com. It has a lot of interesting points and spurred the idea for this blog.
A big problem with the housing market, and a major contributor to its collapse, is that most buyers enter a new home with the idea that it’s an easy investment. Up until now a new home was looked at as a nest egg for later. To be true, this would mean that every house purchased would appreciate in value which was a common opinion before 2007. So when a market crash comes along there are a lot of people upside down on a home that they once thought would be their key to retirement.
Experts believe that this will lead to two things. The rise of rental properties will no doubt be a direct result from the recession and housing market crash. Whether its plain fear of owning a home and taking on a mortgage or it’s the realization that owning isn’t always the right thing to do, the attitude has changed. This is hard for people to swallow because it is contradictory to what has been preached from our society including the government. Regardless of the reason, rental properties are about to take off.
Outside of rental properties, the way Americans view home ownership will change. Actually, it has to or we will never get out of this mess. The house will no doubt become a home again. It won’t get the penny stock treatment like it has in the past decade. Sure a home is still an investment but it should be more than that. Not for any other reason than it makes sense financially.
How New Homes Can Overcome The Foreclosure Market
Posted by Sibet B Freides in Real Estate Economics, Real Estate Sales, Real Estate Trends on August 26th, 2010
In a market flooded with REO homes it is hard to convince a first time home buyer that buying a new home is the right choice. With so many discounts, it’s hard for buyers to really consider newly built homes. The good news for builders is that new homes can offer things that older ones just can’t.
I recently read an article titled “9 Reason to Choose a New Home Over a Resale” and it pointed out the distinct advantages of buying a new home. For builders and developers, these 9 points are the things that can win you the first time homebuyer who might be on the fence about buying new or getting a good deal on a foreclosure.
Most of the 9 points are nothing we haven’t seen before but its good to be reminded especially during this tough time. They include a reference to energy efficiency in regards to building envelopes and appliances that promote energy savings. It also mentions the customization options that most builders are giving buyers in today’s market. All of this added with better financing options make buying a new, energy efficient home pretty desirable.
Even though this article was written for buyers, as builders and marketers, we can use this information to understand what buyers will be looking for. Most of us understand what benefits buyers are looking for without reading this article but it’s important that these benefits are strongly communicated. We in the industry “get it” but does your consumer? Incorporating all of these incentives means nothing if buyers aren’t aware of them. There is little doubt that most developers know that energy efficiency and customization are big selling points in the new home market. Where everyone is coming up short is with his or her messages. All 9 points from this article can be incorporated into a cohesive marketing plan. Building these homes is not enough. We must be able to communicate these features in order to convince buyers that buying new in a troubled market is a solid investment.
The New American Dream
Posted by Sibet B Freides in Demographics, Marketing, Real Estate Economics, Real Estate Trends on August 12th, 2010
Past government policies have always promoted home ownership. In fact, Herbert Hoover believed that owning a home in America could help combat the spell of Communism during the Red Scare. Owning a home has always been the American way of life or at the least the desirable way of life.
It seems that our financial turmoil and the still slumping housing market is drastically altering the American dream. According to government officials and real estate experts, renting is the logical answer for housing and economic recovery.
Not only is this considered the answer to our country’s real estate woes but it also seems to be the logical choice for Americans. Attitudes have changed over the past three years when it comes to owning a home and we are going to see a drastic increase in demand for rental properties. We have learned a valuable lesson in that not everyone needs to own a home. While some may consider this idea harsh, the truth is that the attitude of ownership for all is what got us in this mess in the first place.
It’s comforting to know that the market will eventually fix itself or at least it appears it will. Those homeowners who shouldn’t have owned in the first place are the ones who have more than likely been foreclosed on. This puts them into the rental market where they probably should have been to begin with.
I know this all sounds a little harsh but there is a lot of truth here. Everyone is entitled to own a home but that doesn’t mean everyone should unless it makes financial sense. There is a big difference in the two. When buyers take on mortgages that they can’t handle they’re hurting more than just themselves. The housing market crash has definitely taught us that. The good news is that these hard times have taught buyers, lenders, and government officials a valuable lesson in home ownership.
Prepare for the rise of the rental market.
