How to Help Buyers Beat Out the Competition

Daily Real Estate News | Tuesday, July 30, 2013

With home buyers finding themselves in bidding wars all over the country, how can you help make sure they aren’t outbid every time?
In 18 states, 69 percent of homes on the market fielded multiple offers in June, according to real estate brokerage Redfin. Bidding wars are reportedly most common for bargain-priced homes where home buyers are competing with investors.
The Wall Street Journal recently highlighted some of the following tips for buyers who want to win a bidding war without overpaying.
Don’t lowball an offer: “Make sure your initial bid isn’t insulting,” The Wall Street Journal reports. Syd Leibovitch, president of Rodeo Realty in Los Angeles, advises his clients to submit their maximum bid first rather than try to base their offer on what they think other buyers will do. He says clients too often lose a home to a higher bidder when they were willing to pay a higher price from the beginning.
Set a “walkaway number”: At the beginning of their real estate search, have your buyers pick the number that is their absolute maximum. This will help them avoid getting caught up in the competition if they face a bidding war. This maximum limit should include the amount they can get from a lender, plus some extra cushion. That will ensure they are taking into account insurance, taxes, and other costs of home ownership.
Be flexible: Being flexible — such as negotiating closing dates or offering a “rent back” to sellers — can help set your buyers apart.
Get prequalified: If your buyers need financing for their home purchase, they need to know how much a lender is willing to give them. Getting prequalified shows that a buyer has the ability to close.
Be the backup: If your buyer loses out in a bidding war, you can still communicate to the seller that the buyer is still interested in purchasing the house — even if another bid has been accepted. A transaction can fall through in the final hours, which would allow your buyer to step in.
Source: “How to Win a Bidding War,” The Wall Street Journal (July 27, 2013) [Log in required]

10 Markets Where More Buyers Bring Cash

Daily Real Estate News | Friday, July 26, 2013

Home buyers who require financing for their home purchase can struggle to compete against buyers who have offers of all-cash.
Where are all-cash deals are the most prevalent? Cash deals represented 80 percent of home sales in June in Vermont; 58 percent in Nevada; 57 percent in Florida, and 51 percent in New York, according to RealtyTrac. Cash deals represent a very small percentage in Texas, Utah, and New Mexico.
The markets with the most all-cash transactions tend to have a high number of foreclosures and depressed home prices, which attracts investors and private equity firms, according to RealtyTrac.
The following 10 metros had 40 percent or more all-cash deals out of the total home sales in June, according to RealtyTrac:

1. Miami/Ft. Lauderdale: 64%
2. Las Vegas: 62%
3. Tampa, Fla.: 58%
4. Detroit: 56%
5. Orlando: 53%
6. New York: 49%
7. New Orleans: 43%
8. Memphis: 43%
9. Jacksonville, Fla.: 42%
10. Atlanta: 42%

Source: “Housing markets where cash is king,” CNNMoney (July 25, 2013)

Fannie: Fast Rise in Mortgage Rates Could Hurt

Daily Real Estate News | Tuesday, July 23, 2013

The rise in mortgage rates over the last couple of months has been “significant” and could hamper the housing recovery, economists note in Fannie Mae’s Economic Strategic Report for July. However, home sales so far have been little affected by the spikes, they say.
The 30-year fixed-rate mortgage has risen more than 110 basis points from the first week of May to the end of June. In early July, it started to ease somewhat. Still, the report says that despite the increases, rates are still near historical lows. It’s the sudden rise in such a short time that has been alarming, the economists note.
Mortgage applications for home purchases have fallen about 9 percent since early May, when the rise in rates began. However, pending home sales during that same period rose to the highest level in more than six years. Many of those sales, though, are in cash, which means they may be less tied to the rise in mortgage rates.
Fannie Mae economists predict that mortgage rates will continue a gradual rise and average 4.7 percent in the fourth quarter. That is about 40 basis points higher than economists had predicted a month ago.
Economists predict home sales will rise about 8 percent in 2013, and the median home price will be $189,000 for existing homes and $276,000 for new homes in the fourth quarter.
Source: “Fannie Mae Expects Rates to Continue Higher,” Mortgage News Daily (July 22, 2013)

Are Young Home Buyers Being Left Behind?

Daily Real Estate News | Friday, July 19, 2013

Young, first-time buyers are struggling to purchase a home. With low inventories of homes for sale, young first-timers are finding themselves competing against other bidders who are willing to pay cash. Meanwhile, many young buyers are having trouble qualifying for a loan, often due to high student loan debt.
Overall, young buyers have been left out of the housing recovery more than any other age group, according to a new USA Today analysis. The home ownership rate for 25 to 34 year olds has gone from 46.7 percent in 2006 to 29.7 percent in 2011 — a decline of 7 percentage points. As comparison, the 45-54 age group has seen home ownership rates fall 3.8 percent.
National home ownership rates during the same timeframe has fallen 2.7 percentage points — from 67.3 percent to 64.6 percent, USA Today reports.
"There's been no situation as devastating as this, and it's probably taken a greater toll on the younger generation," says Budge Huskey, CEO of residential brokerage Coldwell Banker. "They've seen other friends or acquaintances that may have even gone through a foreclosure. There's a psychological aspect of the impact of the recession that goes beyond the mere finances."
The median age of first-time home buyers was 31 in 2012, according to National Association of REALTORS® data. First-time home buyers are viewed as critical to a healthy housing market, allowing older Americans to purchase their next home and helping to stimulate new-home construction.
But the number of first-time home buyers has been steadily falling in recent years. In May, first-time buyers accounted for 28 percent of existing-home purchases — a drop from 34 percent a year ago, according to NAR.
"Giving people the opportunity to buy a home is a way to provide them a vehicle of accumulating wealth," says Chris Hebert, research director for the Joint Center for Housing Studies of Harvard University. "Making sure this next generation has this opportunity will be important for their well-being."
Source: “Housing recovery leaves Millennials behind,” USA Today (July 17, 2013)

Housing Inventories Rising Faster Than Usual

Daily Real Estate News | Monday, July 15, 2013

The number of homes for sale rose 4.3 percent in June to 1.9 million—the highest level in the past year. These gains are also higher than usual for this time of year, according to newly-released housing data from realtor.com®.
Following two years of declines, housing inventory is finally reversing course. More home owners are seeing rising prices and may be more apt to try to sell their homes.
The number of homes for sale has risen the most in the past year in areas that had seen the largest declines, such as Sacramento, Calif. (up 11 percent), Atlanta (up 10.9 percent), Phoenix (up 6.2 percent), and Miami (up 2.2 percent). From May to June, inventories soared by the highest month-over-month amounts in Southern California, with inventories up 51.5 percent in Orange County, 45.7 percent in Los Angeles, and 18.1 percent in San Diego, according to realtor.com®.
However, inventories of homes for sale remain far below last year’s level in markets such as Boston (down 35.1 percent), Denver (down 30.1 percent), Detroit (down 25.7 percent), Seattle (down 23.2 percent), and San Francisco (down 21.7 percent).
Realtor.com® also reports that median asking prices climbed 0.5 percent in June from May, reaching $199,900. Median asking prices are up by 5 percent over last year.
Source: “Housing Listings Multiply in June,” The Wall Street Journal (July 15, 2013)

Did Cash Buyers Save the Housing Market?

Daily Real Estate News | Wednesday, July 17, 2013

Cash real estate sales have risen the last few years to some of the highest levels on record, and a new report by CoreLogic suggests that these sales heavily helped to contribute to stabilizing the residential housing market and leading it into recovery.
In the early 2000s, cash sales averaged 25 percent of home sales. But in 2007 and 2008, cash sales began to rise as foreclosures started to increase. By 2012, cash sales were making up 40 percent of sales and have since inched down to 39 percent as of May 2013.
“Without cash sales overall, sales today would be much lower and the price declines would have been worse,” Mortgage News Daily reports about CoreLogic’s findings. “More recently, cash sales have helped fuel price increases dramatically in several boom and bust markets. Median prices for cash sales are up 24 percent from a year ago while prices of sales generally have increased 15 percent.”
The rise in home prices will lead to a lower presence of cash sales as investor activity returns to more traditional levels, CoreLogic notes. With cash sales receding in recent months, first-time and trade-up home buyers will need to step in to keep the recovery expanding, CoreLogic notes.
Source: “Cash Sales Saved Housing Market -CoreLogic,” Mortgage News Daily (July 16, 2013)

'Boomerang Buyers' Are Staging a Comeback

Daily Real Estate News | Tuesday, July 16, 2013

“Boomerang buyers”—former home owners who have gone through a short sale, foreclosure, or bankruptcy in the past few years and are saving up for a down payment to purchase a home again—are coming back. They're expected to flood markets in some of the hardest hit areas for short sales and foreclosures in the coming years. For example, boomerang buyers are predicted to account for nearly one in every five home sales in the metro Phoenix area this year—double the projected U.S. rate.
Rising rents and the desire to own again now that the economy is more stable are driving many boomerang buyers to re-enter the market. They also want to jump in before interest rates and home prices climb too much higher.
But how soon they can jump back in will depend on the type of loan they had as a previous home owner. For example, boomerang buyers who had FHA loans may need to wait only three years if they can prove that a hardship, such as job loss or death of a wage earner, led to their foreclosure or short sale.
Borrowers have typically been required to wait five to seven years to qualify for another loan, but mortgage giants have begun to change their rules to allow home owners who underwent a foreclosure or short sale to qualify sooner. Those who underwent a short sale will likely qualify the soonest. However, not all lenders are participating, so borrowers will need to shop around.
Freddie Mac’s wait time is usually four years following a short sale or deed-in-lieu, and seven years after a foreclosure. Fannie Mae may require a seven-year wait for a foreclosure, but only a two-year wait following a short sale as long as the borrower can provide a 20 percent down payment.
The following markets have the highest share of boomerang buyers, according to John Burns Real Estate Consulting:

• Riverside-San Bernardino, Calif.: 4.1% (percentage of all U.S. boomerang buyers in 2013)
• Los Angeles: 3.7%
• Phoenix: 3.6%
• Chicago: 2.5%
• Atlanta: 2.4%
• Las Vegas: 2.12%
• Washington, D.C.: 2.1%

Source: “New Wave of Buyers Ready to Hit the Real Estate Market,” The Examiner (July 15, 2013) and“Phoenix housing market sees 'boomerang buyers' sooner than expected,” The Arizona Republic (July 14, 2013)

Report Suggests Intentional Underbuilding

Daily Real Estate News | Thursday, July 11, 2013

With housing inventories so low, why aren’t homebuilders jumping in by ramping up production to meet demand?
A new housing report by Arizona State University suggests that homebuilders are methodically holding back their inventories and keeping the rate of new-home building low, despite population growth projections.
“New-home builders don’t appear too anxious to help meet the demand,” says Michael Orr, a real estate expert at ASU’s W.P. Carey School of Business.
A few years ago, during the housing bubble, homebuilding outpaced population growth. But builders are taking the opposite approach this time around. In an environment with tight underwriting for loans, builders are exercising some caution and restraint.
“They are trying to make sure they don’t overbuild like they did before the housing crisis, and they want to keep prices moving up,” Orr says. For example, Orr notes that in the Phoenix area, new-home sales rates are less than one-third of what is needed to keep pace with the projected population growth. He added that, with limited supply, builders are able to increase prices for new homes.
Those in the building industry have cited labor shortages, tight underwriting standards, and the rise in lot prices as a reason building hasn’t kept pace.
Source: “Why home builders aren't rushing to meet demand,” Phoenix Business Journal (July 9, 2013)

NAR on Blank Slate Tax Reform: 'Do No Harm'

 

Daily Real Estate News | Wednesday, July 10, 2013

The National Association of REALTORS® today is asking its members to let their senators know that real estate tax provisions are critical to the economy and should remain high on lawmakers’ priority list as they take a blank slate approach to tax reform.
NAR is issuing a Call for Action to its members that emphasizes the need for any tax legislation to do no harm to the economy by retaining the deductions for mortgage interest and property taxes, the capital gains exclusion on proceeds from the sale of a principal residence, and extension of mortgage cancellation relief. Also emphasized are deprecation rules and the continued tax-deferred treatment of 1031 exchanges.
Under the blank-slate approach to tax reform announced by the leadership of the Senate Finance Committee recently, senators are asked to start from scratch and identify the provisions they want to keep in the Tax Code. Sen. Max Baucus (D-Mont.), the Finance Committee chair, says he'd like to start developing a bill this fall.
NAR staff professionals explain the blank-slate approach to tax reform in this short video interview with REALTOR^® Magazine.

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Home Prices Post Biggest Jump in 7 Years

Daily Real Estate News | Wednesday, July 03, 2013

Home prices are moving up at a quicker pace, rising in May by their largest annual amount in more than seven years with more to come, according to the latest report released by CoreLogic.
Home prices increased 2.6 percent in May over April and have shot up 12.2 percent compared to last year’s prices. CoreLogic economists are predicting that home prices will rise by another 2.9 percent in June, making the yearly price gain 13.2 percent year-over-year.
Tight inventories of homes for sale across the nation have pushed home prices higher, according to CoreLogic.
“Home price appreciation, particularly in much of the western half of the U.S., is increasing at a torrid pace,” says Anand Nallathambi, president and CEO of CoreLogic. “Across the country, pent-up demand and continued low interest rates are fueling strong demand for a limited inventory of properties. We expect that trend to continue to drive up prices throughout the balance of the summer months.”
When including distressed sales, the following five states have seen the highest home appreciation in the past year, according to CoreLogic:

• Nevada: +26%
• California: +20.2%
• Arizona: +16.9%
• Hawaii: +16.1%
• Oregon: +15.5%

Source: CoreLogic and “Home prices rise by most in seven years in May: CoreLogic,” Reuters (July 2, 2013)

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