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The Chris & Caleb Team Assessment

Depending on whether your outlook is the “glass half full or empty”, the stats are either going to excite you or scare you. Let’s discuss what the stats are telling us…

PENDINGS: June was another “slow” month. Pendings were down at an extremely low point around the 300 mark. Typically pendings are between 450 and 550. Why the extreme drop? Simple – we said it last month and it’s the same again – the Tax Credit. The tax credit pulled many buyers from the future and enticed them to buy now instead of later. We expect activity to be lower than usual possibly through September when we see a bump in activity before the winter hibernation. The only way that these numbers can go is up. We expect them to climb slightly higher every month through the rest of the year, as there are no great incentives for people to run out and buy a home.

CLOSED SALES: Closed sales in June were right in line with the 5 year trend which was pushed higher by the tax credit. June was the last month that the tax credit will have an effect on closed sales, as there is typically at 45-60 day lag time between pending sales and closed sales. We predict we will see closed sales drop around 350 mark in July. This number again is unusually low, but with the last two months of pending sales being at record lows, there is little chance that closed sales will follow the 5 year trend or even last years numbers. It’s like we are in the slow months of December and January, where there pending sales are typically around the 300 mark and the subsequent months for closed sales are also around that level. The next two months will be a very telling as to how the fall market will shape up. If there is little showing activity, then we know that sales will continue to be low.

ACTIVE LISTINGS/SUPPLY: This number is one of those “scary” numbers. As you can see, inventory is at it’s highest level in the last 10 years. With demand being down and supply being up, prices have only one way to go and that is down. The gap between the supply and demand is pretty extreme which is concerning. However, the increase in the number of homes for sale could have been pushed by the tax credit. We’d really like to see the gap between supply and demand decrease of the next several months.

AVERAGE SOLD PRICE: The average sold price for a home sold in Chester County in June of 2010 was about $360,000. This number continues to follow a mix of the 5 year trend and 2009. This number is really more of an indication of what price range the activity is happening. For instance, in October of 2009, there as a heavy emphasis on the lower price ranges due to the looming end of the first tax credit. Of course, it was extended just before the expiration in November.

What Does This Mean?

For Seller’s: If you are considering or are selling a home in Chester County these numbers can be concerning. It means that the overall value has and will be declining. The Chris & Caleb team have been warning our clients of this for the last 6 months. It was very apparent that there would be a lull in activity following the end of the Tax Credit. But that was then, what do you do now? If you are considering selling your home but don’t think you can get enough for it, please contact us. We can get you the insight and advice you need to make the best decision possible. We expect the market to be “depressed” for another several years, possibly as many as 4 or 5. But that also means that what you are going to buy will be “on sale” as well. You may make out better now, than you would in several years. But to know that for sure, let us get you the facts and information you need to make that educated decision.

For Buyer’s: With interest rates being historically low at or around 4.7%, you continue to have a tremendous opportunity in front of you. Seller’s who need to sell are willing to give you a great deal, which will save you money. Combine that with the interest rates and you have a huge win. If you are a ready, willing and able buyer, you have tremendous power in the current market. BUT – you must make sure you align yourself with the right agent. We are confident that we are those agents. To know what your next steps are just get in contact with us!

Next Steps:

• What Is My Home Worth? Want to get a good idea of what your home is worth? Complete my Home Value Survey and find out what your Chester County Home is worth. . .
• What Is That Home Selling For? “Stop the car, honey … look at that house. I wonder what it’s selling for” Does this ever happen to you? Ever wonder what that house is selling for? Search and view all homes for sale in the Chester County area
• What do I need to know before I sell? Typically when a home does not sell, there is one reason…and it isn’t price. Please contact me to discuss what you need to know before you sell!

BTW, We do have very specific data for every price range and area of town. Want specific data pertaining to your neighborhood or your own home? We have it! Please let me know if you would like a neighborhood-specific analysis by contacting me!

Supply of homes for sale in Chester County:

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Demand- Close home sales in Chester County:

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Pending home sales in Chester County:

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Average home sale price in Chester County:

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Q: How do I check if my fireplace is in good condition?

Fireplaces are considered very inefficient heat sources, but they are a feature homeowners look for in their homes. There are two types of fireplaces: brick (or sometimes rock) and mortar fireplaces and a prefab unit with masonry surrounding it.

Fireplaces and chimneys are part of a general inspection. A home inspector will check for major cracks in the masonry surrounding the firebox. The inspector will then look into the flue and operate the damper to verify that it works.

Because the inspection is a visual inspection, the inspector cannot see if there are any internal problems within the chimney, but they can inspect the exterior of the chimney by observing the condition of the masonry.

The inspector will then look for creosote stains leaking out from the mortar joints, which would indicate that there is a break in the flue liner.

For more information, visit my preferred home inspector’s website, at npiweb.com/benson

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Buying a mobile home is very much like buying a car, in that the mobile home, generally speaking, does not improve in value. If you don’t have cash and need to get a loan, lenders see mobile homes exactly as the see cars. In many cases, traditional mortgage lenders do not do loans on mobile homes.

In addition to the investment/value issue, you typically have a lot rent that is somewhere between $300 – $500 per month. At current rates (5.5%) $300 a month is worth about $60,000 in purchase price. So if you buy a mobile home for $60,000, you could technically purchase a traditional home for around $120k for the same monthly payment, AND build equity and credit.

Some advantages include:

• Lower cost than owning a home.
• You can move the house itself
• Shorter time frame for a new mobile home than a new traditional home

Disadvantages:

• Value does not appreciate (not including land)
• Interest rates are generally higher than a traditional home
• You usually have to pay lot rent, unless you own the property
• Not as sturdy as traditional homes
• Not as energy efficient as traditional homes

In the end, mobile homes are a great way to save some money, but usually, when something is cheaper, it’s usually for a reason.

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• Minimum Down Payment: It has been 3.5% but is rumored to be jumping to 5%. I don’t know that for sure thought. That means, that if you are purchasing a home at $200,000, TODAY your minimum down payment will be $7000. IF it goes to 5%, that jumps the minimum down payment to $10,000. That’s a difference of $3000. That can be a very big deal for first time home buyers.
• More limitations on Seller’s Assist: A Seller Assist is where, at closing, the Seller gives money back to the Buyer, usually to reduce closing costs. Currently the maximum allowed Seller Assist is 6% for an FHA loan. On a $200,000 purchase, that can be as much as $12,000 of assistance. I have not heard what they will be lowering them to, but I believe it will probably be reduced by 1 to 3%.
• Raising Minimum Credit Scores: Currently, the minimum credit score to qualify for an FHA loan is about 600. I have not read or heard what they may change it to.

Understand, the FHA does not give out loans, but does insure them. And in order to insure them, the loans, those using them and the homes they are buying must qualify for the loan. Many first time home buyers use an FHA loan when they purchase a home for several reasons:

• Credit scores are less of an issue: On a conventional loans, if your credit score is under a 720, then the interest rate that you would qualify for would be higher than what the base rate is. For instance, if the rate currently available is 5.125% and your credit score is 680, the interest rate you may qualify for may be 5.75%, for example. On an FHA loan, the rate is the rate, as long as you have the minimum score or better. So if the available rate is 5.375% (which is what it was yesterday, Jan. 19th) then that is the the rate no matter how close to the minimum score you have.
• Interest rates are generally the most favorable: If you have a less than stellar credit score, the chances that your rate with an FHA loan will be lower than that if you went with a conventional loan are very good.
• The Debt-to-income ratios are more lenient: Debt-to-Income (DTI) limitations for conventional loans are generally in the mid 30′s, meaning that if your overall debt payments (credit cards, auto loans, mortgages) constitute more than 35% of your overall Gross (pre-tax) income, then your “DTI” would be too high to qualify for that loan. On an FHA loan, currently it is in the mid to high 40′s.
• Private Mortgage Insurance is less on a monthly basis: The FHA allows the PMI to be structured in such a way that it can reduce the effect on a monthly payment by as much as 40%. That can equal as much as $100 or more and that is a significant savings for a first time home buyer.

My advice:

When, not if, but when these changes are put in to place and depending on how much of a change it is, this will definitely slow the market down. Less buyers will be able to qualify for a loan which equals less demand. So if you are a buyer or are considering buying between now and the next two years, I highly recommend that you speak with a qualified Buyer Agent today. They can help you determine how these changes will effect you and help you create a plan to put you in the best position possible when you do go to buy. For sellers – If you must seller or are considering selling in the next two years, your best window may be in the next 3 months. Speak with a qualified Realtor who knows your local market and can give you good advice.

Of course, if you live in Chester, Montgomery, Delaware, Lancaster or Berks Counties, I would be more than happy to help you.

Articles referenced in this post:

National Association Of Realtors article

Wall Street Journal Article

HUD Press Release

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Here are some highlights

• Pending Home Sales Rise
• Tax Credit gets spring season off to early start
• Why you should list your home now, not in the spring

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Experts anticipate that the market may hit a lull in the early part of 2010 as buyers take their time looking prior to the April 30 deadline for the expanded and extended tax credit. Two things to keep an eye out: will mortgage rates begin to rise and will the inventory of houses continue to decrease (they’ve gone down considerably over the last few months in the three Suburban West counties)

READ THE ENTIRE PHILADELPHIA INQUIRER ARTICLE

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