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Intero Insider: Why Plunging Home Sales Won’t Kill Real Estate

By Gino Blefari | August 31st, 2010 0 Comments

The latest housing news is pretty grim: existing home sales fell 27.2 percent in July from the previous month to 3.3 million, the lowest in more than a decade. We’re definitely seeing the expected drop-off coming off the end of the home buyer tax credit.

Most of us saw this coming. The very point of the home buyer tax credit was to pump life into the market and entice buyers to move off the fence. Take it away and you’re merely peeling back the covers from the real situation, showing that many potential buyers are tepid, scared of losing their jobs, optimistic that prices will come down just a little more, or simply not able to get a loan.

Amid this news, the New York Times featured a story saying that housing is no longer considered a means to build wealth.

But that’s where I need to stop and think.

There’s no getting around the fact that the market is slow and expected to be slow through the end of the year. True.

And there’s no question that flipping houses is not the part-time moneymaking hobby it once was during boom years. Very true.

But to swear off real estate as a means to build wealth is a bit dramatic. It’s true that in most cases, a buyer cannot look at a house solely as a monetary investment. It’s simply not that – it’s more. It’s a roof over your head. It’s the place where your children grow from toddlers to young adults. It’s where you spend your days and nights living your life.

A home is shelter, but it’s also ownership. Last I checked, you can’t really put a price on the kind of pride that comes with homeownership. Ask anyone whether it’s a dream of theirs to own a home and you’ll likely hear a resounding “yes.”

Again, it’s the intangibles of real estate that will keep this market alive.

A home is not a casino slot machine. It’s not a mutual fund. But it is a relatively safe way to spend your monthly housing budget. In the long-term, homes will still return value to their owners – and while it may not be in the form of doubling your returns, it is a true asset, a thing that you own free and clear after the mortgage is paid.

At the end of the loan, it’s still yours, not the landlord’s or the bank’s. Yours.

So even amid a declining market while analysts and pundits decry real estate a non-wealth builder, a dead end, myself and 60 million+ other homeowners disagree. We decided to put our money into our homes and are proud of it. I don’t think that sentiment is going to change overnight.

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Intero Insider: What Lower Demand Means

By Gino Blefari | August 25th, 2010 0 Comments

The data on the street points to lower demand for homes and increased supply throughout the end of the year. This is a recipe for market slowdown, for sure. But the news means different things to different people and entities.

Here is my take:

Home buyers: The best news is first. Buyers have it made right now. Interest rates are now at all-time lows. Not historic or near historic, but all-time lows.

And of course the higher inventory and lower demand in many markets gives the buyer more to choose from and more negotiating power simply because there is less competition from other buyers.

Bottom line for home buyers is that this news is good – excellent, in fact.

Home sellers: Simple math and physics tell us that when one side of a scale is up, the other side is down. Sellers may be on the down side of the equation here, but there is an upside. Fortunately, for the seller, this simple math can never account for the intangibles like an elite neighborhood, amazing schools, or the emotion that often is real estate.

Every sale needs just one buyer – the right one. When this occurs, the seller gets what he or she needs and moves on.

Bottom line for home sellers is that it may be tough, but definitely not impossible. If your location is coveted or your home has a lot of other appeal, there’s no need to fret.

The housing industry: Slowdown for the second half of the year, but not a halt. Be prepared for longer deals and more hurdles. These may be frustrating times, but many successful entrepreneurs are made in times of economic hardship. Be patient, work hard and don’t be afraid to innovate. Now is not the time to retreat.

Bottom line for the industry is that these slow times will weed out the weakest professionals.

Renters: Fewer home buyers can mean more renters so look for much more competition when you’re searching for your next rental. Rents may climb in some markets.

Bottom line for renters is that it may not be the best time to look for a new place. If you are financially and psychologically ready to become a homeowner, you might want to check out your buying options instead.

The economy: A slow housing market is not the greatest news for the economy as a whole. But the underlying factors causing the slow housing market are actually of more concern to the economy right now – slow job growth, massive deficit, deflation risks.

Bottom line is that the housing market will continue to be a topic of discussion in Washington. Look for more programs or program ideas to help tip the scales to faster growth.

To conclude, you see there are winners and losers in the low-demand, high-supply scenario. It’s all in how you see it. Opportunities are there for everyone.

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Intero Insider: Good News for Employed AND Unemployed

By Gino Blefari | August 17th, 2010 0 Comments

In times of economic hardship, most news tends to focus on the bad stuff: unemployment, consumer spending, consumer confidence, slow economic growth. This may be why a recent economic story in The New York Times caught my eye: “For Those With Jobs, a Recession With Benefits.”

The headline says it all – the silver lining. It seems obvious, but for those lucky enough to still be employed, these are great times to be a consumer.

Just look at interest rates for mortgages. If you’re employed and looking to buy a house, you’re part of a group of borrowers who will lock in rates so low even buyers from a few months ago would cry. 4.375% percent (APR 4.579%) on a 30-year fixed!! That is something to brag about. Even an $8,000 home buyer tax credit cannot beat the savings achieved on these borrowing costs.

Further tipping the scales in favor of today’s employed are wages. According to the NYT article, “The typical jobless person has been out of work six months. The typical worker has received a raise.” Since the start of the recession in December 2007, real average hourly pay has risen nearly 5 percent.

This is obviously bad news for those who have been out of work for some time. But again, the bright side: Rising wages are good news for housing. And while the market may not see a huge pop from this right away, higher wages at least provide confidence for those buyers who are in the market today, and those sellers who are hoping for a match.

Remember: Every home sale needs just one qualified buyer. Your pool of buyers starts to increase with every job that is secured.

A lifeboat for unemployed homeowners

But even amid bad times for the jobless, there was some good news out of Washington last week. The Obama Administration is prepping $3 billion in financial assistance to aid homeowners in the states most affected by unemployment.

The assistance program will send $2 billion in aid to state Housing Finance Agencies for programs for borrowers who are struggling to make payments due to job loss. Another $1 billion in aid will come from the U.S. Department of Housing and Urban Development to provide up to 24 months of assistance to homeowners who are at risk of foreclosure.

So you see, it’s not all bad right now. Let’s hope it works!

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Intero Insider: Don’t Miss the Big Opportunity

By Gino Blefari | August 10th, 2010 0 Comments

In this type of market, it’s best to focus on what’s working, what’s favorable, what’s reality. And when preparedness meets opportunity you get success. Whether you’re a buyer, investor, seller or agent trying to make sales, you strive to find the opportunity for success.

Distressed home sales continue to represent this opportunity. Distressed homes – those homes that are in danger of going into foreclosure or are for sale because the homeowners defaulted on their mortgage – were 32 percent of home sales last month, compared with 31 percent in May, according to a recent report from the National Association of Realtors.

What’s happening here and why should we pay attention?

In a word: inventory. Distressed properties more and more are making up a huge chunk of the inventory in many markets around the world (not just here in the U.S.). But wait! Remember that great Warren Buffet quote about when to get interested in an investment? He said:

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”

At first thought, you’d think that something that already represents a third of the market for home sales is past the tipping point. But I don’t believe that. We’ve been doing very well at Intero by studying the market and moving swiftly to seize distressed opportunities. So should you.

Earlier this summer, I spoke about distresses properties at a prestigious real estate conference in Singapore. The distressed market is nothing to run from, folks. In fact, the true real estate lovers saw this coming long ago and stashed cash accordingly.

And sure, for the average consumer, buying a distressed property is going to be a mind-boggling experience (if it even happens in the first place). But all the more reason to study the process and figure out how to make it work if you’re really interested in pursuing this opportunity. When preparation meets opportunity you get success.

You just have to remember another quote from the great Warren Buffet:

“Risk comes from not knowing what you’re doing.”

Which takes us back to that studying process and being prepared.

Where can you learn about the market for distressed properties? We have knowledgeable agents who can help. Many are specializing in this field right now for this very reason. Even so, I’d advise you to do some reading on your own as well. Take the time to choose the right agent and be sure you’re armed financially.

Just because we’re in a “slow” housing market, doesn’t mean you can’t profit in the end.

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Intero Insider: How’s the Market? Not So Fast

By Gino Blefari | July 20th, 2010 0 Comments

Lately, I’ve been noticing how poorly the housing market is covered by the media. And I don’t mean that the media is to blame for all our problems. What I mean is that real estate markets are varied, complex and much much smaller than you may realize.

Housing is more than a headline. When you listen to reports of national home prices increasing or demand slowing, it’s easy to get lost because they rarely go much deeper than that.

Throw in a mixture of reports – on the same day, even – and it gets all the more confusing. Case in point: last week CoreLogic reported home prices increased for the fourth straight month, while the IMF warned of a possible double-dip recession for housing. Confused?

Let’s not forget reality #1 of real estate: location is everything.

For instance, your national report may be screaming doom and gloom, but your neighbor’s house just sold for $50,000 above asking price. Or your nightly news report may say home prices are up, but meanwhile your neighbors are slashing prices. What’s going on here?

The housing market, like all markets depends on the balance between supply and demand. But in real estate, supply and demand can vary wildly not just by city and state – but by neighborhood and even street. That’s how delicate the market for real estate is and why it is so difficult to talk about at the macro level.

So there’s location to consider. But then there’s also individual circumstance. Sure, it may be a horrible time to sell your house when you read the numbers, but if you are relocating for a once-in-a-lifetime career opportunity, then it’s your time to sell.

Same for buyers. Sure, it may be the best time in the last 15 years to buy a house, but if you’re looking at a potential job loss or have no money for a downpayment, now is not a good time for you.

Think about that the next time you or someone asks, “How’s the market?”

The real question to ask is, “How’s the market in your neighborhood and under your circumstances?”

Real estate is not only local – it’s all relative.

Keep this in mind as we continue to slog through this recovery. Because the horrifying and confusing headlines will not stop anytime soon. Foreclosures are at massive levels, supply is climbing, and interest rates are at historic lows. The mixture of these news bits will make your head spin. Are things getting better? Worse?

The only people who can truly answer those questions are the buyers and sellers who are in your market right now, and the agents who know it inside out.

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Intero Insider: What We Need Are Jobs

By Gino Blefari | July 14th, 2010 0 Comments

We are now halfway through the year – a good time to reflect and to look ahead at what the rest of the year may bring.

For me, I’ve been focusing on market fundamentals and how they may guide real estate buyers over the summer and fall.

While many in our industry this past week focused on Congress’ decision to pass an extension for the Home Buyer Tax Credit – giving buyers under contract another 90 days to close and still qualify for the credit – I feel we should’ve been talking more about jobs.

Jobs should be the focus when looking at ways to fuel long-term housing demand. Jobs create incomes, which are essential to support mortgages on home sales. Without a positive job outlook, the other strong demand fundamentals already in place – rock-bottom interest rates, softened prices – can’t sustain the market alone.

Unfortunately, the news on that front has not been that great:

  • Private payroll gains weren’t as high as expected in June – meaning more small businesses cut jobs or refrained from hiring.
  • Unemployment rates eased in some cities, but increased in others. At the national level, unemployment inched up .2 percentage points to 9.3 percent from last year’s level.

I know it’s not easy to fill the employment gap as quickly as we’d like to see. But until we get positive news on jobs, the reality is that we’re looking at a long haul for housing. Sure, a new tax credit would help. And the historic low interest rates are definitely working in our favor. But those jobs really are key.

Jobs are what we need for a sustainable, healthy housing demand. Match this with record low interest rates – 4.67 percent last week on 30-year fixed-rate mortgages – and then we might have ourselves a good housing cocktail.

It’s not going to happen overnight. As with everything, we need to practice patience in this recovery and understand which market forces will really make a difference.

It may sound strange to anyone who is without a job or on shaky employment ground, but it really is a great time to be a home buyer – IF your situation is right. If you’re lucky enough to have job security and you also have the means, you are in the middle of some of the cheapest borrowing in history. And you have a lot of inventory to choose from in most markets.

So as we make our way through the second half of the year, let’s focus on the fundamentals that will not only give housing a quick lift, but more importantly sustain upward movement.

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Intero Insider: Life After the Home Buyer Tax Credit

By Gino Blefari | June 29th, 2010 0 Comments

It’s safe to say now that the action brought to the nation’s housing markets by the Homebuyer Tax Credit is over. Any buyers who wished to take advantage of this credit had to have been in contract by April 30 and now must close by June 30.

But please remain seated before exiting this ride and declaring the housing market D-O-O-M-E-D (as several headlines have cried this week). See, there is still a very key factor in place that is working in homebuyers’ favor:

Historically Low Interest Rates

This often-overlooked little fact is actually a really important point to ponder. That’s because when you look at today’s rates, which average around 4.75 percent on a 30-year fixed rate mortgage, according to the Mortgage Bankers Association’s latest survey, you realize what a win this is for borrowers – even for those who missed the tax credit deadline.

These low rates are far more significant than any tax credit in terms of savings and incentive to stoke demand. How is that? Well, let’s look at the math:

Let’s say today’s buyer is looking at a 5 percent interest rate on a 30-year fixed loan of $285,000. He’s disappointed at missing out on the tax credit, but since he’s able to lock in at a lower rate than he would’ve gotten two months ago at 5.25 percent, he’s actually saving $15,782 in interest over the life of the loan, which according to my math is significantly higher savings than what that tax credit would’ve gotten him ($8,000).

So today’s buyer nearly doubles his savings in interest compared with the April tax-credit buyers? Doesn’t spell D-O-O-M to me.

Let’s look at another scenario:

This buyer would be able to lock in a 5.25 percent rate on a 30-year fixed loan of $400,000 in July. There’s no tax credit to light a fire under his decision, but say the economic news circles expect a slight uptick in rates by the end of August. If he waits, he’ll risk increasing his rate to 5.35 percent, thereby adding $8,943 in interest to the life of his loan.

I’m not saying that rates will save the day. Remember: There are no quick fixes. But we also have to be sure we understand the forces that are working in the market’s favor.

Tax credits may come and go, but at the end of the day it’s things like historic low interest rates that will keep buyers interested.

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Intero Insider: Housing Starts Are Down? I’m Shocked. Or Not.

By Gino Blefari | June 22nd, 2010 0 Comments

Last week, the financial sector was up in arms about some seemingly surprising news. It seems that, in May, housing starts — the number of building permits that were pulled in order to start construction on new homes — were down.

With all of the homes that were purchased this spring, surely the troubles in the housing market were over. Right? In April, sales were positively booming! What on Earth could have happened to put a slowdown on things?

<Psst! Hey! The tax credit expired!>

Wait. What? What’s that you say? The tax credit expired? You mean that didn’t amp up the market and then keep it up? It wasn’t the answer to our economic recovery dreams?

No. It wasn’t.

In fact, I’ve been saying this for some time. For those who were able to take advantage, the Homebuyer Tax Credit was great. But while it gave the spring real estate market a much-needed boost, I have long theorized that the sales it produced were simply being borrowed from the future. People who had already planned to buy a home simply did so earlier.

Now that the credit is gone, the buyers have little incentive to make their decisions now.

There are far too many variables in play for buyers right now. Mortgage rates are in a constant state of flux, underwriting standards are tougher than ever, and a great many sellers are still living in Fantasy Land when it comes to their proposed list prices, so many buyers are simply choosing to sit tight and see what happens. There’s very little pressure on them.

“OK, then … so now what?”

First off, sellers need to get a handle on reality. If you need to sell your house, then understand the rules of the game. Pie-in-the-sky dreams of top-dollar prices and bidding wars will likely get you very little except mountains of frustration. Find a REALTOR in whom you have confidence. Listen to him (or her), for he/she understands the market as it is today.

Second, and most importantly, we must all exercise some patience. It took us some time to get ourselves into this morass of economic detritus, and it’s going to take some time to get out. There are no quick fixes.

The real estate market will come back. It always does. It’s one of the few constants in our economy. In the meantime, let’s learn from our mistakes. Borrowing from Peter to pay Paul isn’t going to work. Let’s use our heads and work toward real recovery, real improvement.

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Intero Insider: Homebuyer Tax Credit, ACT III

By Gino Blefari | June 15th, 2010 1 Comment

That’s right. It’s back. The homebuyer tax credit strikes again – like a string of sequels in a movie franchise.

First, there was the first-time homebuyer tax credit. It received mixed reviews, but ticket sales were good, and popular opinion encouraged a sequel. The Homebuyer Tax Credit: Part II (The Revenge), opened to great fanfare. It ran only for a limited engagement, however, and people clamored to take advantage of its benefits before the end of its run in the real estate (and economic) theater.

Many of those who were able to get in on the homebuyer tax credit, which stipulated that buyers needed to be under contract by April 30, 2010, but also close/settle by June 30, 2010, are now finding themselves in a bit of a pickle.

So many people bought homes in order to take advantage of the credit that banks, lenders, title companies, and every other body that plays a role in the settlement of real estate transactions, are having one heck of a time getting it all done by the June 30 deadline (which is approaching rapidly). They’re so backlogged that many buyers might not get their tax credit after all.

Unless Congress takes action. Quickly.

Right now, they are considering extending the time to close those transactions by as much as three months. That’s a good thing, too, because the National Association of REALTORS (NAR) estimates that if Congress takes no action, as many as 75,000 homebuyers might lose out because they can’t meet the June 30 deadline.

Regardless of your position on whether the tax credit was a good idea in the first place, I think we can all agree that everyone who was under contract in time to claim it ought to be able to do so. That the settlement process is totally backlogged isn’t their fault and they shouldn’t be punished as a result.

What will Congress do? Will they save the day for tens of thousands of Americans? Stay tuned … the credits on this story haven’t rolled just yet!

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Intero Insider: Celebu-Drama & Real Estate. Who Cares?

By Gino Blefari | June 9th, 2010 0 Comments

I read a lot. Lots of news, mostly. Blogs, real estate-related news items…that sort of thing. I owe it to Intero’s clientele, as well as our team of real estate professionals, to stay abreast of the most current information. Have you looked at the “news” this morning, though? I was pretty disappointed.

Why?

Because a search of the top real estate “news” items right now returns a glut of useless stories about Jesse James & Sandra Bullock listing their home for sale. A crush of chatter about the divorce of Al & Tipper Gore and what they plan to do with their real estate holdings during the proceedings. There are even stories about how the characters from Sex & The City have risen to the upper echelons of New York real estate throughout the course of the series.

That’s just embarrassing. There are serious, weighty issues with which our industry should be dealing with and on which it should be reporting. But they’re not getting talked about all that much.

If you’ve been affected, whether by foreclosure, strategic default, or if your credit has taken body blows as a result of this mess, do you really care about Sandra Bullock’s real estate “woes”? Of course not.

You have problems of your own to deal with.

If you’ve gone through a foreclosure and have lost your home, there are several things that you should do. The first thing is to meet with a financial planner to determine a long-range plan to help you recover financially. This plan could include something as simple as setting up a plan with Consumer Credit Counseling, or as complex as declaring bankruptcy. It will certainly involve formulating a workable budget, something to which you can strictly adhere.

The next thing is making certain that you follow that plan to the letter of the law. Missed payments are not an option, as each one will hamper your ability to rebuild your credit. Without that, purchasing another home won’t be an option.

Another thing that’s imperative, especially with ever-tightening lending standards is to save, save, save. 100% financing, especially for those who have damaged credit, is a thing of the past. If you’ve got a credit score that’s less than perfect, it’s very likely that you’ll have to make a down payment of about 20% on your next home purchase, so minding your pennies is of the utmost importance.

It’s important to note that, even if your credit isn’t rock solid, lenders are looking for a consistent track record. If you’ve had problems in the past, but have been consistent in making payments and in making good on your debts, you’ll have a much better shot at securing a new mortgage in the future.

If you are concerned about how you can rebuild your credit and your financial life, talk to your financial advisor, your Intero real estate professional, or your attorney. It’s not an easy process, but it’s one, with a bit of time and effort, that can be done.

As for Sandra Bullock’s beach house? I’ll leave that to the E! News network.

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