Posts Tagged ‘Intero Insider’

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Intero Insider: April Sales, Values Trending Up

By Gino Blefari | May 23rd, 2012 0 Comments

The latest housing numbers are out and the message is clear: Things are heating up in markets across the country once again, and the best news about this is the fact that it’s no longer just investors who are gobbling up properties. Now we’re seeing more demand and sales coming from primary residence buyers.

Sales of existing homes increased 3.4% to an annual rate of 4.62 million in April from March, and were up 10% from the same month a year ago, according to the latest numbers from the National Association of Realtors. The best part of this news is that home values also increased 10.1% to $177,400 in April. The increase in values may seem to hurt affordability, but in actuality it tends to spur more buyers who are on the fence to make a move while conditions are still great.

Buying conditions are still excellent for buyers. Average rates on the 30-year fixed-rate mortgage were 3.79%, according to Freddie Mac’s latest survey measuring the week ending May 17.

Not only are the numbers good – they’re showing strength in all the right places. A healthy market is one that sees sales and values increasing at a reasonable pace, and one that is not unevenly filled with distressed properties and investor buyers.

The share of sales that were foreclosed properties is slowly diminishing. Distressed homes, which include foreclosures and short sales that sell for deep discounts, accounted for 28% of April sales, with 17% being foreclosures and 11% being short sales. This was down from 29% in March and 37% in April a year ago. Foreclosures sold for an average discount of 21% below market value in April, according to NAR, while short sales sold at an average 14% below market value.

The share of buyers who were first-time purchasers increased to 35% in April, up from 33% in March, but down slightly from 36% in April last year. Meanwhile, investors purchased 20% of homes in April, down from 21% in March, and holding steady from 20% during the same month last year.

Depending on your market, you may be seeing a plethora of discount deals still out there, or multiple bid situations. NAR says this is because inventories are tight in some markets, notably the Washington, D.C., area, Miami; Naples, Fla.; North Dakota; Phoenix; Orange County, Calif.; and Seattle. Expect stronger price increases in most of these areas in the coming months.

All of this shows that to talk about the condition of the housing market right now, you really need to first define which segment you’re talking about: first-time buyers, foreclosures, city, state, neighborhood, etc. The market is moving in a few different directions, depending on where you’re looking. Overall, things are definitely trending up, but be sure to understand which segment you’re trying to assess before drawing any big conclusions.

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Intero Insider: 4 Signs It’s Time to Buy a Home Now

By Gino Blefari | May 2nd, 2012 0 Comments

If ever there was a fantastic time to buy a home, it’s right now. Never mind the fact that I head a leading real estate brokerage company. Let the statistics show you why now is your best bet to get into the housing market:

1. Home values are recovering

U.S. home values rose 0.5% from February to March, the largest monthly increase since May 2006, before values at the national level peaked, according to a recent report from Zillow this month. In addition, the company said in its home value forecast that it expects 19 of the 30 markets it covers will reach a bottom in values this year. Phoenix and Miami-Ft. Lauderdale are expected to see significant home value increases.

2. Interest rates are still extraordinarily low

The cost of borrowing is still extremely attractive for buyers who qualify and are ready for the financial responsibility of a home mortgage. Saying mortgage rates have hit a new “record low” has become a bit of a broken record. At an average 4.04% in the latest Mortgage Bankers Association survey, rates on the standard 30-year fixed-rate mortgage are almost too good to be true. While there’s no sign from the Federal Reserve that rates will increase significantly anytime soon, it’s definitely a great condition for buyers right now.

3. Multiple offers are back

Demand for housing is starting to outweigh supply in some markets across the country. We covered the return of bidding wars this spring in markets like Silicon Valley, Miami, Seattle and Washington, D.C. Even despite the presence of “war” like situations, multiple offers are once again a fact of life in markets with strong economies and job prospects.

4. Rents are rising with no end in sight

The median U.S. rent was $721 per month in the first quarter, up 5.6% from the same period a year earlier, according to the Commerce Department. Altogether, rental income has increased 12% in the year ended in March. In addition to rising rent, the supply of units is the tightest in more than 10 years, with 8.8% of units vacant in the first quarter. This at a time when the demand for rental units is at the highest in 15 years. This means more buyers likely will continue to jump from that tight market into owning while the numbers make sense.

As you can see, the buyer market is about to get more crowded than it’s been the last few years. These are each solid market forces that could push more and more buyers off the fence, creating more transactions and helping to lift home values this year and next. If you think you want to buy – or know buyers who are testing the waters – now is your chance to take advantage of prime home-buying conditions.

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The Intero Insider: Mitt Romney Eyes Mortgage-Interest Deduction

By Gino Blefari | April 18th, 2012 0 Comments

Throughout the economic downturn and recovery, we’ve seen the topic of the mortgage-interest deduction come up time and again. It’s fitting that Republican presidential candidate Mitt Romney would bring it up this week as millions of Americans are frantically filing income taxes to avoid being late.

In a speech on Sunday, Romney said he’s considering eliminating the mortgage-interest deduction for second homes for high-income individuals. This often comes up with politicians and congressional groups as a viable option for creating more revenue for the federal government.

Let’s first look at the number of homes and owners this might affect. The National Association of Realtors estimates that second homes – including vacation and investment properties – accounted for 38% of home sales in 2011. The group said that about half a million vacation homes and 1.2 million investment properties were sold last year, continuing a trend in which these homes have accounted for the largest chunk of sales since 2005.

Generally speaking, eliminating or making changes to the mortgage-interest deduction is not going to have a great impact on the housing market. While the government may reap some rewards in the form of more cash made via taxation, most homeowners and first-time buyers still see the deduction as an important perk or benefit of owning a home. Messing with this deduction now at a time when the recovery is still quite fragile and slow would be a bad idea.

Eliminating or scaling back the mortgage-interest deduction would hit states in which vacation homes are most popular harder than others. Florida, Maine, Michigan and Colorado could see fewer sales as a result.

Moreover, more buyers have been jumping in the market and buying investment properties in recent years. Sales of investment properties spiked 64% last year. These are properties that otherwise may not have been purchased, which makes a pretty big case for keeping all incentives in place for investors to continue buying, and therefore aiding the housing recovery along.

While some say that the mortgage-interest deduction isn’t as big a deal for second home buyers because of the emotional nature of those purchases, I’m leery of mucking up a homeownership perk that’s long been held as a great benefit to owning a home. If incentives like this are working to keep investors hungry for real estate – and that hunger in turn is helping the market as a whole – then let’s back off and find another way to fix our fiscal mess.

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Intero Insider: Why Rising Rents Could Signal Positive Gains in Home Values

By Gino Blefari | March 21st, 2012 0 Comments

It’s a classic tale of supply and demand: home purchases soften and rental markets in return heat up. People have to live somewhere and when the market for buying becomes unattractive or grows out of reach, they turn to renting (or to moving in with friends and family). But what’s the lasting impact on home values?

Contrary to what you may think, a hot rental market does have a positive effect on housing. Why? Because as rents trend up and show stable income for landlords, more investors see the opportunity in snapping up rental properties. This interest and activity takes low-priced inventory off the market as investors move in and buy, eventually helping to put a bottom under the value of all homes in the local market.

In addition, rent can only heat up so much before it starts to become unattractive cost-wise and renters again turn to buying.

Zillow covered this aspect of rental market dynamics in its latest activity report, which showed that median rents rose 3% from January 2011 to January 2012. While that same announcement last week noted that home values continued to fall during the same period – declining 4.6% – the company’s chief economist noted the impact on home values as ultimately a positive thing for all the reasons mentioned above.

Zillow found that 70% of markets across the U.S. saw an increase in rents, while 7% experienced home value increases.

The main takeaways here are this:

  • If you have cash and are looking to invest, investigate your local real estate market for rental property opportunities. Rents are rising and demand is still high, meaning it’s time to dive in if you’re going to dive in.
  • Renting may be reaching a tipping a point in some markets – meaning that the cost is getting high enough to convert some renters to buyers as they see more value in owning.
  • Some positive market underpinnings are rearing their head as increasing rents can lead to more stability in local market home values.

Housing market stats are tricky. Many conclusions are not always obvious at first. This is why we must always read past the headlines and dig deeper into the meaning of specific market activity to get more meaningful forecasts to inform our decisions.

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Intero Insider: What the Housing Affordability Index Really Says about the Market

By Gino Blefari | March 14th, 2012 0 Comments

Perhaps the single best side effect of a slow housing market is the positive impact on affordability. In the most recent affordability report from the National Association of Realtors last week we learned that housing affordability conditions in January reached the highest level since they began tracking it more than 30 years ago.

NAR’s index is based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the average family’s purchasing power. In January, the index was 206 (an index of 100 is defined as the point at which a median-income household has exactly enough income to qualify to purchase a median-priced home).

What does this mean? The obvious conclusion is that now is a great time to buy a home – if you can afford it and qualify for a mortgage, that is.

However, it’s also good to remember the context of this news and that everything’s relative (read: local) in real estate. I say that because many of our Bay Area markets have been seeing price increases, bidding wars and conditions that may make area buyers conclude that it’s really not so easy to be a buyer these days after all. Unless you’re lucky enough to be paying cash, it can still be extremely tough to get a loan that will cover the cost of an average home around here.

Affordability is an important figure, for sure. But I just want to point out that when taken at the national level, there’s not much of a story to tell. Just because housing has been deemed “most affordable” since 1970 doesn’t mean markets have hit bottom in terms of pricing. Some are actually enjoying highs above recent years. And others will continue to struggle for another year or two at least – as long as their foreclosure situations remain serious and job markets weak.

Affordability is important to the health of markets. But affordability itself really comes down to individual financial situations. Can you afford this home right now and going forward? These are the important questions buyers always need to ask – regardless of market conditions.

So if you’re a buyer or seller paying attention to news headlines like this one, remember to always think locally to find the right context. Yes, housing is the most affordable it’s been since the ’70s at the national level. But that means nothing to your city or neighborhood, which may be experiencing an amazing boom compared to years past – or still lagging behind due to other circumstances.

Affordability in real estate is always relative.

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Intero Insider: The Fastest Way to Save $471 a Month Is Right In Your Home

By Gino Blefari | March 7th, 2012 0 Comments

We’ve been in a period of extreme low interest rates for so long now that I begin to wonder whether we’re kind of numb to it. Not long ago, a 5% rate on a long-term mortgage would’ve had many homeowners’ eyes popping out of their heads. But now, even lower rates are commonplace.

It’s baffling to see new data out that shows American homeowners may be missing out on significant savings via a mortgage refinance. An analysis of January 2012 user data by Credit Sesame found that on average, homeowners who would qualify for a refinance based on their credit situations, income and home equity, are overpaying by an average of $471 per month on their home mortgages.

When you average the savings out over 15 years, homeowners could be saving a whopping total of $84,780 per household or in 30 years, the typical length of a loan, save $169,560.

This type of savings seems like a no-brainer, yet Credit Sesame estimates about 14 million homeowners who could qualify for a refinance haven’t done so. Why is that?

Could it be that we collectively really are numb to the fact that interest rates are so low? Are Americans feeling as though rates will be at rock bottom forever? Are they strapped for the cash it takes to close a refinance?

It’s hard to know for sure, but I wanted to bring the issue to light since the savings potentially are so substantial for the average household. I think we may just have a general awareness issue. As such, here are the general things that qualify a homeowner for a refinance and signal that it may be the right financial move to make:

  1. Rate and point drop is high enough to justify it: The general rule is that a refinance is likely worth the time and effort when you can lock in an interest rate that is ½ to 1 full point lower than your existing mortgage, or when mortgage rates drop 2% below your current rate.
  2. Credit history in good standing: You’ll need just as good a credit score to refinance as you did when you first obtained your home loan.
  3. Sufficient home equity: Don’t expect to be able to refinance right out of the gate after buying your home. Lenders will be looking for a healthy amount of equity before they agree to refinance your loan. But figuring out your equity can be tricky in this market – especially if your local market is wildly different than when you first bought (which is likely even if you bought only two years ago). This is a topic all its own, so I suggest reading this thorough article on the subject on Bankrate.
  4. Cash to close the refinance: Yes, refinancing will cost you money to do, which is another reason you’ll want to thoroughly examine the math before jumping into a decision. Sometimes it may not make financial sense. Get an estimate of costs involved from your lender before making any decisions.

Refinancing isn’t always the right decision. But with the prospect of potentially saving $471 a month, it’s well worth considering!

Contact your Western Bancorp representative for refinancing information.

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Intero Insider: Stars Are Aligning for Housing Recovery

By Gino Blefari | February 29th, 2012 0 Comments

Pending home sales reached their highest level in January in nearly two years, according to NAR’s report this week, rounding out a handful of positive news for housing markets in the last week or two.

Pending sales trending upward is an interesting trend to watch considering the recent rise in cancelled contracts. I say this because pending sales at least gives us an indicator of buyer sentiment since many of the failed contracts seem to be due to things that are out of buyers’ control like not securing financing needed to purchase the home or the appraisal coming in below the contract price. With a rise in pending sales, we at least know that buyer intent is on the rise and more folks are trying to buy homes.

NAR’s pending home sales index was up 2% to 97 in January from 95 in December, and is 8% higher than January 2011. The January index is the highest since April 2010, when it reached 111.3 as buyers were in a mad dash to take advantage of the home buyer tax credit.

Other positive happenings for housing:

Improving job market: In January, unemployment hit its lowest level in three years, continuing a five-month streak of improvement. Without jobs, people don’t buy or move so this obviously is a good thing.

Home builders are gaining confidence: Home builder sentiment, tracked by the National Association of Home Builders and Wells Fargo, in February reached its highest level in nearly five years. This basically means that home builders are more confident that market conditions are improving to the point that new home sales will be positively impacted.

Housing stocks are up: The stock market is a far-from-perfect indicator, but it at least gives a reading of how investors are feeling. The nation’s home builder companies have seen share prices increase 60% since October, according to an analysis on Time’s website.

In the Bay Area, we have all the amazing economic trickledown activity from major tech company IPOs – recently game developer Zynga and Facebook’s pending IPO in May – to look forward to in housing. In fact, some of our local markets such as San Francisco have already seen the positive housing news that comes along with that.

Overall, 2012 is looking to be a great year for housing compared to the last five or six. The presidential election likely will also ward off any major controversial policies that could negatively impact the market. With all this in mind, I think we’re looking at our big comeback year. It will be particularly good for certain segments of our local markets and marginally improved at the national level. Not a boom by any means, but we’ll take it!

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Intero Insider: Save the Mortgage Interest Deduction!

By Gino Blefari | February 22nd, 2012 0 Comments

President Obama’s budget proposal last week attracted more than a few passionate voices from real estate who oppose elements that would limit itemized tax deductions, including the mortgage interest deduction that enables homeowners to deduct part of their mortgage interest from their overall tax bill.

In short, the budget would reduce the value of itemized deductions to 28% for married couples with incomes over $250,000 and individuals with income over $200,000. The current value of deductions could be as high as 33-35%, depending on the tax bracket the household is in. The reason it’s so vehemently opposed by real estate industry groups like the National Association of Realtors is that it’s a vital component to the housing recovery – and it feels like a penalty being put on responsible homeowners.

One of the perks of owning a home has been the ability to deduct a portion of the money paid in mortgage interest each year from an owner’s tax bill. This is part of the reason ownership makes more financial sense than renting for many families over the long-term.

Now feels like the worst possible timing for a change like this. Removing this benefit that is highly regarded by many would-be homeowners as a perk of owning versus renting likely would have a negative impact on the economic recovery.

Also, as NAR points out in a letter opposing the budget proposal, the nation’s homeowners already pay 80-90% of U.S. federal income taxes. Raising taxes on them now could seriously wear down demand, taking home values with it at a critical time for the overall health of the housing market.

Many might argue that the value of the change on the overall economic state of the nation far outweighs that of the individual homeowners who would be affected. But, the fact is that by eroding home values, the nation is affected in the end anyway. In addition, perception is a highly valuable (or dangerous) thing when it comes to real estate markets. Just the very perception that homeownership may have lost some of its luster in the often-cited tax benefits by new buyers has the potential to do damage.

And we can’t afford to lose any momentum in housing demand.

NAR is fighting against this proposed change, and so am I. Let’s save the mortgage interest tax deduction for the nation’s homeowners and incoming buyers. Now is not a good time for a change like this. Obama may not see it, but the deduction is vital to the stability of the nation’s housing markets.

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Intero Insider: Mandated Down Payments Unfairly Impact Buyers in High-Cost Areas

By Gino Blefari | February 15th, 2012 0 Comments

The issue of mandated down payments is back in the spotlight as a recently released study found that requiring by law a minimum down payment of 20% would have a dramatic, negative short-term impact on the housing market. The study, released by the Center for Responsible Lending at the University of North Carolina, found that implementing such a mandate would push out 60% of would-be home buyers from the market.

As you can imagine, the topic has garnered criticism from both sides. While many say that requiring a minimum down payment would be better for homeowners and the economy as a whole by protecting us from defaults and stemming foreclosures, others say that it unfairly bumps out otherwise qualified home buyers. And the delicate state of the market in many areas would feel an impact from such a move.

What’s my take? I think a “back to basics” approach to housing in general is a good thing. Would-be buyers should be willing to put their own skin in the game so to speak for many reasons. For one, they’ll be starting out their ownership journey on a much better financial foot – namely, they likely won’t be ruined by the first financial curve ball that may come their way. Secondly, the more you put down the better your loan terms so the overall cost of ownership actually does decrease in most instances.

The problem though is high-cost areas like our very own Silicon Valley and the Bay Area in general. Twenty percent is no small feat for most of our local buyers, considering the median cost of a home across the Bay Area is currently around $351,000, according to DataQuick. That’s $70,200 in cash that a buyer would need, which doesn’t even include closing costs – which we’ll estimate would be another $10,000-$12,000. And let’s be realistic: that median price is quite optimistic for most people’s situations. To get a home in a safe and secure neighborhood with good schools, we’re talking much higher for most of our cities.

This is why I think a blanket minimum down payment mandate is potentially dangerous. It could seriously polarize the market in high-cost areas, leaving many otherwise qualified would-be home buyers out in the cold. And that just doesn’t feel right.

In addition, a lower down payment doesn’t always translate to loan defaults and foreclosures. How else could you explain the existence and longevity in the FHA loan program, which enables qualified buyers to buy with much less cash down?

Thankfully, while the standards for the bill that would put this mandate in place will be heavily debated over the next year, we’re not likely to see anything implemented in 2012. We can thank the election for that as politicians historically have shied away from such hot-button housing policies that have the potential to polarize voters.

I do expect this will be talked about though, and it’s not going to just go away. But if you’re in the market to buy a home in a high-cost area and don’t have the 20% in cash, you can consider it another reason to move quickly!

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Intero Insider: Facebook’s IPO and the American Dream

By Gino Blefari | February 8th, 2012 0 Comments

By now, you’ve heard all about Facebook’s S-1 filing last week – the social networking site’s first steps toward what is expected to be a $5 billion IPO. It’s a fascinating story, and something we’re sure to hear a lot more about over the next three months leading up to the actual offering.

There is also a fascinating real estate story about to unfold. No, not the kind of story in which agents start to find wild success selling homes via Facebook. But the real kind: young Internet minds work hard to build a raving success, take the company public, and get wildly rich in the process. And what’s the inevitable next step? They buy real estate.

That’s right. Our very own Silicon Valley, which is already flush with brilliant tech minds who’ve found amazing success in their careers, is about to be flooded with even more young success stories thanks to Facebook’s IPO. The rippling effect of the wealth about to be made by Mark Zuckerberg and 3,000 Facebook employees on the local economy is expected to spark a jump in real estate sales and also boost the local economy overall for many years.

This is how we know that Americans – regardless of background, age, or current economic standing – still have a healthy appetite for owning their own homes. It’s among the first things we all do when we realize success in our careers.

News stories may have you believe that many Americans are over owning a home – that the wounds of foreclosure, financial hardship and upside down home values have created a huge disconnect in what was once the American Dream. But I’m here to tell you that it’s simply not true, and Facebook is my case in point.

Watch for evidence that the American Dream is alive and well in our local real estate market after this IPO hits Wall Street in May (and leading up to then, too).

This is why I don’t panic when personal finance gurus start to talk about shifting values among America’s young – that our kids are more interested in renting than buying. Because it’s simply not true. Give them success and a healthy income and they will buy a home.

I’m excited to see this generation of dot-coms growing and sustaining, defying the slow growth trend that’s happening in almost every other sector. This is exactly the type of positive news we need right now. Let’s embrace it!

Eight years ago, a young Zuckerberg took a chance and came out to Silicon Valley one summer while enrolled at Harvard. That chance is now paying off, and our local economy is lucky to be a part of it.

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