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Trouble ahead. . . ? Comments Off

Here on the Chris & Caleb team, it is our goal to be be the most honest and truthful real estate business you know. To that effect, we want to let you know about some stats that are scary, not just for home sales or real estate, but for everyone and the overall economy. We also want to say that we know local real estate – we are NOT financial experts. But the charts we are about to share are very clear indications of what’s coming. The charts displayed below are from a recent article posted on CalculatedRiskBlog.com. Please visit this site, it is excellent. The specific article can be read here. Of course none of this is a surprise to us or to the regular visitors on this site, as we have been predicting this for over a year.

Existing Home Sales

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They are back on track to be on pace with the trend, which hit it’s high in the middle of 2005. While the Tax Credit did increase sales, it also artificially inflated prices. It’s not healthy.

Existing Homes: Months of supply

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At their highest levels in more than 10 years. The same goes for the stats locally. Another “not good” sign.

A Distressing Gap

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The reason for the gap, as explained by CalculatedRiskBlog.com is because of the huge amounts of inventory in resale homes and distressed properties. Once that inventory is reduced, that gap will close. My question is – when will that happen? At this rate, with the real rate of unemployment close to 17%, not for at least several years.

A few more thoughts on the current state of affairs. . .

  • Sales – The National Association of REALTORS had been projecting over the last year a sharp decline for the period immediately following the expiration of the home buyer tax credit, since many buyers rushed to take advantage before the deadline expired. This coupled with continued employment concerns was a major reason for the decline in sales.
  • Prices – There is a silver lining for current homeowners. Their value has firmed across the region, with numerous gains reported (Year-over-year for July, prices were up 1% in Delaware County, 7.6% in Chester County and 9.6% Montgomery County). All year, we’ve been seeing a flattening price trend, which is the greatest benefit of the home buyer tax credit. Looking ahead, prices are likely to hold fairly event – in part from very low new construction, and prices are coming back in line relative to family income.
  • Market Conditions – There are great opportunities now for buyers who weren’t able to take advantage of the tax credit. Mortgage interest rates are at record lows, home prices have firmed and there is a good selection of property in most areas. Thus, buyers with good jobs and favorable credit ratings find themselves in a fortunate position.
  • Outlook – Near-term home sales will be soft – the real question is what happens in the 4th Quarter. Job creation so far this year has been less than forecast, but with rock-bottom mortgage interest rates and historically-high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy can consistently add jobs.

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Posted on: 08-25-2010
Posted in: General real estate statistics

National Real Estate Commentary for July 2010 Comments Off

The U.S. housing market continues to benefit from the tax credit: home prices and sales remain above year-ago levels. As the summer progresses, however, the positive impact of government stimulus will wind down. Experts point to improved stability as a sign the market can likely hold its ground without further support from the government. However, economists indicate that the key for the housing market through the end of 2010 will be job growth and a manageable level of distressed properties.

The economy continues its journey to recovery with two steps forward and one step back, but the ground lost during the recession was great and the progress so far should be celebrated. The road to this particular recovery has been expected to be more prolonged than many previous recovery periods. Consumer confidence lowered from its high in May primarily due to a disappointing employment report, while the swelling federal deficit has also raised concern. Unmanageable debt levels have lead some European countries into their current situation, and Americans do not want to follow suit.

A job bill that would have further extended unemployment benefits has not gotten off the ground due to concerns over the deficit. Sited as a top priority for the government, a financial overhaul bill continues to proceed though Congress. The bill’s goal is to protect the financial system and the average consumer from unnecessary risk and unsound lending practices in an effort to build a stronger system for the long-term stability of the U.S. economy.

The Housing Market

Existing Home Sales
Existing home sales slowed slightly in May to 5.66 million, down 2.2% from April but up 19.2% from last May. This is the eleventh consecutive month of year-over-year increase. Lawrence Yun, NAR chief economist, attributes this to the “ongoing effects of the home buyer tax credit,” and he anticipates the same next month. In May, 46% of sales were from first-time buyers, down slightly from the previous month’s 49% but still considered high.

Median Home Price
The median price for an existing home was $179,600 in May, up 2.8% from a year ago and 4.2% from April. Distressed homes, accounting for 31% of last month’s sales, continued skewing prices downward slightly as they are usually discounted from comparable homes. Overall, prices this past year continued to show increased stability over the previous year. Vicki Cox Golder, president of NAR states, “With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus.”

Inventory
Total housing inventory declined slightly to 4.89 million in May, representing between eight and eight-and-a-half month supply of sales (if homes continue to sell at the current pace consistently and no new ones come on the market). There are about the same number of homes for sale as last year, with 1% more currently available. Although there continues to be a nice selection of available homes for buyers, the 3.4% fewer number from last month helps to further stabilize prices.

Mortgage Rates
Mortgage rates fell to a new record low in June amid a drop in consumer confidence concerning the recovery. The tone of the Federal Reserve’s latest meeting was notably tempered on the outlook for recovery, indicating that the economy is stronger than last year but there is still much ground to cover. Interest rates significantly below 5% may pique the interest of more investors.

Affordability
Affordability remains advantageous, supported by the lowest mortgage rates in decades as well as lowered home prices. The home price-to-income ratio continues to remain well below the historical average of 25%, but stabilized home prices are drawing affordability back up toward more normal levels. The ratio now stands at 15.4%.

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Posted on: 07-29-2010
Posted in: General real estate statistics, Market Update

I heard the taxes were high in Coatesville? 2

If I received $1 every time I heard someone say, “I don’t want to live in Coatesville — the taxes are too high,” then I would be very wealthy. I am an honest, transparent person, and I am not ashamed to say that I live in Coatesville. And honestly, I am not offended that people just write off the Coatesville area because of hearsay. However, I do think it’s a bit foolish to make a blanket statement like that without some basic facts.

I know real estate well enough to understand that while some of the tax rates in the Coatesville area may be a bit higher than others, the home prices are lower, making homes more affordable and attainable. My gut was telling me it wasn’t as bad as people were saying, so I decided to do a little study.

The following study takes an analytical look at property taxes in five of the main school districts that my team and I service, and it compares them as objectively as possible. The five school districts are Downingtown, Coatesville, West Chester, Great Valley and Octorara. It’s basically what I call the “Rt. 30 Bypass Corridor.” In order to take a fair look at how these districts and townships compare to each other, we looked at the specific data, including but not limited to – Cost of the average home in that district; Average principal and interest payment on that “average” house; Millage rate per township – and more. The complete list of data is found in the complete study.

Of course there are some assumptions that need to be made. Those assumptions have to do with what constitutes the “average” home, how the home purchase is financed, and what debt-to-income ratios are required for a loan. The full list of assumptions can be found in the download-able study.

You can download the full report Chester County Tax Comparison report here.

Let’s see what conclusions we can draw from this study.

  • The first criteria you have to consider is, “How much annual income do you have?” Income is the overriding factor that really determines what you have to choose from. If you can’t afford the average home in the Great Valley School district of $371,000, then it is even silly to consider looking there. At that point, it really is irrelevant whether the taxes are high or not.
  • After the income question, you have to ask yourself, “What type of monthly payment am I comfortable with?” Again, this is another question that basically makes the tax question irrelevant. If you are only comfortable with a maximum monthly payment of $1,400, then you really only have one choice. On the other hand, if you are comfortable with $2,000 or more as a monthly payment, then you can pick and choose from any of the five districts included in this study.
  • Once you understand what you can and are willing to afford with a house, then one can look at the townships within each district. Each township has its own millage rate and can vary as much as 12 mills, which is a big difference. If you determine you can generally afford a home in a certain district and are concerned with the amount of taxes you want to pay, then you will want to look into each specific township. Of course, there are many, many factors that go into choosing which home to buy. This is not meant to be a guide on how to choose a home, only a commentary on the cost of owning a home, in relation to taxes.
  • Which School District had the highest taxes? Let’s look at that from several perspectives:
    • Total millage rate:
      • Octorara – 37.2m/27.63% of your monthly payment
      • Coatesville – 34.65m/26.2% of your monthly payment
      • Downingtown – 31.44m/24.38% of your monthly payment
      • West Chester – 23.51/19.69% your monthly payment
      • Great Valley – 23.48/19.44% your monthly payment
    • Pure dollar figure (which depends on average cost of home)
      • Downingtown – $5,015
      • Great Valley – $4,618
      • Coatesville – $4,609
      • Octorara – $4,462
      • West Chester – $4,236
    • Rank of schools based on average price of the home
      • Great Valley – $371,000/+24% over “median”
      • West Chester – $340,000/+13% over “median”
      • Downingtown – $301,000/”median”
      • Coatesville – $251,000/-17% over “median”
      • Octorara – $226,000/-25% over “median”

It is easy to see that just making a simple judgment on taxes, without knowledge, is a foolish thing to do. In the end it is about much more than just the taxes. Factors such as income, type of home, size of the home, setting and specific location are also important.

If your goal is to pay the least amount of taxes possible, then the Great Valley school district is for you. However, you must be prepared to spend about $150,000 more than you will in other areas. If you can only afford a maximum of $250,000 as your purchase price and want a lot of land, then you will need to be willing to live with paying the higher taxes in the Coatesville and Octorara school districts.

One golden rule I live by is “Always seek first to understand.” This report is aimed at helping anyone looking to make a real estate decision in the Chester County area do just that.

If you need help in finding or selling real estate in the Chester County area, please do not hesitate to contact Chris or Caleb of the Chris & Caleb Real Estate Team.

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Posted on: 05-20-2010
Posted in: Chester County, General real estate statistics, Market Update, News

National Real Estate Outlook: February 2010 Comments Off

TireTractionJanuary began the new decade with indications that the economy is beginning to gain traction. Real GDP grew by 2.2 percent in the third quarter of 2009 and preliminary signals point to a continued positive trend for the following quarter. GDP is a measure of total products and services produced by a country and indicates the health of the country’s economy.

A dip in home sales in December was due in large part to timing.  First time buyers that would have liked to close in December but qualified for the tax credit bumped their timeline up in order to cash in.  News of the credit’s extension reached many of them after their plans to close in December were set.

Interest rates are back below 5% and home prices are up compared to last year. The government continues to attempt to minimize the impact of troubled homeowners by continuing to improve its foreclosure prevention program and  has also taken steps to help foreclosures buyers purchase faster.

Although the unemployment rate is expected to stay high as jobs increase modestly,  experts expect the economy to continue to grow in 2010.

The Housing Market

Existing Home Sales
housemoneyphotopreview_000After a rising surge for three straight months, existing home sales slowed in December after first-time buyers rushed to meet the original November tax credit deadline and evidenced by first timers accounting for 51% of sales in November compared to 43% in December. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, NAR chief economist. December sales of 5.45 million remain 15 percent above the 4.74 million-unit level last year.

USExistingHomeSalesFeb2010
Median Home Price
Existing-home price was $178,300 in December, 1.5 percent higher than December 2008 and 8.2 percent above its low in January 2009. It was the first year-over-year gain in median price since August 2007, attributable to an increase in the number of mid- to upper-priced homes in the sales.
USHomePriceFeb2010

Inventory
The supply of homes continued to shrink, falling 6.6 percent to 3.29 million, representing a 7.2-month supply at the current sales pace. Compared to a year ago, there are now 11 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.

USInventoryFeb2010_001

Mortgage Rates
Mortgage rates have moved back to less than 5 percent, which have been categorized by industry experts like Freddie Mac chief economist Frank Nothaft as “near a record low.” This move that may help boost home loan demand and lend support to the housing market recovery. On January 28, the average 30-year fixed-rate mortgage was 4.98 percent.

USMortgageRatesFeb2010

Affordability

Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

Sources: National Association of Realtors, Freddie Mac

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Posted on: 02-13-2010
Posted in: Chester County, General real estate statistics, News

National Real Estate Outlook for January 2010 Comments Off

December closed out the year with further indications of a budding recovery, illustrating we’ve come far from the pessimistic outlook this time last year. Soft home prices, affordable financing conditions as well as the government’s tax break targeted at the housing market have contributed to providing the much needed boost to the housing market. Solid gains in home sale activity helps to pare down inventory to a healthier level, which in turn will likely bring more stability to home prices.

The most recent Federal Reserve meeting indicated a more positive outlook about our economic condition as they pointed to plans to reel in emergency programs.  Mortgage rates, which have hovered around 5 percent for most of 2009, are starting to climb again. Economists expect these unprecedented rates to go back up as Fed’s program to purchase mortgage-backed securities expires in March and private investors are demanding higher returns.

According to Nar 2009 President Charles McMillan, “Even with price declines in recent years, the typical home seller saw their equity increase 27 percent.”  NAR’s most recent Home Buyers and Sellers survey reported that 87 percent of survey respondents consider their home a good investment, and more than half see it as a better investment than stocks. This indicates that Americans still see homeownership as a source of steady long-term wealth accumulation.

Employment will continue to be closely watched and steps on the road to recovery will likely continue to come one-by-one.  Although concerns remain, many experts are hopeful of a brighter year in 2010.

The Housing Market

Existing Home Sales – Up 44% from last year

ushomesales

Existing home sales surged a record-breaking 44 percent from a year ago, the highest annual gain since NAR started tracking the data in 1999. The strong gain can be attributed to first-time buyers who accounted for 51 percent of all home sales, the highest on record dating back to 1981, as they rushed to beat the deadline for the first-time buyer tax credit that was due to expire November 30. The previous high was 44 percent in 1991. Sales activity is at the highest level since February 2007 when it reached 6.55 million.

Median Home Price – Very favorable

Low home prices continue to add the extra boost to home sales. Existing-home price was $172,600 in November, 5 percent higher from its low in January. While still 4.3 percent down from a year ago, it is the smallest decline in two years. Distressed properties, which accounted for 33 percent of all transactions in November, continue to hold down the median home price, as they typically sell for 15 to 20 percent less than traditional homes.

Inventory – Lowest level in almost 3 years

usinventory
The supply of homes is now at the lowest level in almost three years. The supply of existing homes for sale at the end of November declined 1.3 percent to 3.52 million, representing a 6.5-month supply at the current sales pace, down from a seven-month supply in October.  Generally, a six-month supply is considered balanced. Compared to a year ago, there are now 15 percent fewer homes on the market.

Mortgage Rates – Inching Up

Mortgage rates have begun to inch back up as government support runs its course and interest rates rise. On December 24, the average 30-year fixed-rate mortgage was 5.05 percent, the first time it has gone above 5 percent since the end of October. According to Amy Crews Cutts, deputy chief economist at Freddie Mac, “Extraordinary resources have been put into keeping the rates down and supporting the mortgage market, and it’s hard to imagine that the rates can go much lower than they are.”

Affordability – Best since 1970s

Affordability continues to be at a record level thanks to unprecedented interest rates, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

Sources: National Association of Realtors, Freddie Mac

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Posted on: 01-13-2010
Posted in: General real estate statistics, Market Update

National Real Estate Outlook Comments Off

Small steps to economic recovery continued last month. Among the positive readings was the report of a third quarter GDP growth rate of 2.8 percent, which followed four consecutive quarterly declines. This advance comes in well ahead of that of our Canadian neighbors, whose economy was once anticipated to be the first country out of recession, and by significant margin. Canada posted marginal 0.4 percent growth. Unemployment fell in November for the first time since April 2008. A strong rebound in home sales activity from year ago levels also points to a firmer stabilization.

With the extension of the $8,000 federal housing tax credit into spring 2010, first-time buyers will now have an additional few months to purchase their dream homes. Expansion of the income restrictions now gives possibilities for higher earners to participate too. And the $6,500 tax credit now available to established homeowners with five consecutive years or more in their homes broadens the opportunity landscape. This in turn will allow the housing market more time to find a more solid footing on a sustainable recovery.

Although economists continue to debate the overall shape of the recovery, it is widely agreed that the U.S. economy will take a long time to rebound. Unemployment is expected to remain high for several quarters and the number of underemployed is expected by some economists to remain a drag on growth prospects. On the brighter side, according to some economists, a slow and steady growth will likely fair better for the long-term well-being of the economy. Slower, sustained growth can help prevent dangerous asset bubbles, like the recent housing and technology bubbles, from growing and bursting.

The Housing Market

Existing Home Sales – Up 24% from last year

Existing home sales recorded another strong gain in October with many buyers rushing to beat the deadline for the first-time buyer tax credit scheduled to expire at the end of November. Sales surged 10.1 percent to 6.1 million units over September sales of 5.54 million and are 23.5 percent above the 4.94 million-unit level seen last year. Sales activity is at the highest level since February 2007 when it reached 6.55 million.

Median Home Price – Very favorable

Low home prices are contributing to extremely favorable affordability conditions. Existing-home price was $173,100 in October, 5 percent higher from its low in January but still 7.1 percent below October 2008. Distressed properties, which accounted for 30 percent of all transactions in October, continue to hold down the median home price, as they typically sell for 15 to 20 percent less than traditional homes.

Inventory – Lowest level in more than 2.5 years

“We are getting closer to a general balance between buyers and sellers,” according to Lawrence Yun, NAR chief economist. The supply of homes is now at the lowest level in more than two and a half years. Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, representing a seven-month supply at the current sales pace, down from September’s eight-month supply. Compared to a year ago, there are now 15 percent fewer homes on the market.

Mortgage Rates – Back at 4.78%

Remaining at attractive levels for people looking to buy a home or refinance, historically low interest rates are boosting the market. Rates for 30-year fixed loans fell to 4.95 percent in October from 5.06 percent the month before. During the week ended November 25, rates again dropped to the low 4.78 percent reached in the spring. As the economy enters its recovery phase and concerns over inflation come back, mortgage rates are expected to go up.

Affordability – Best since 1970s

Unprecedented interest rates, low home prices, as well as the first-time buyer tax credit are lifting the housing market. All these factors combined are “adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970,” according to Lawrence Yun, NAR chief economist. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

Sources: National Association of Realtors, Freddie Mac

Posted on: 12-16-2009
Posted in: General real estate statistics, Market Update

This month in Real Estate – August 2009 Comments Off

Highlights:

  • Mortgage rates down from 6.5% last year at this time to 5.25%
  • Affordability index down to 16%
  • Homes sales up a whopping 17% from last month
  • Home prices up another 3.6%
  • Buyer mortgage tips on making the most of this Buyers market

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Posted on: 08-29-2009
Posted in: Buyers, General real estate statistics, Home Owners, Market Update, Videos

This Month In Real Estate – July 2009 Comments Off

  • Median Home price rose 3.8% in April and May
  • This is the largest monthly increase in over a year
  • Number of homes sold also rose 2.4%
  • Tips on getting the most money for your house from HGTV personality Kendra Todd

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Posted on: 08-28-2009
Posted in: Buyers, General real estate statistics, Market Update, Videos

Existings Home Sales Rise, sign of healing… Comments Off

This is some good news, finally about the real estate market.  My opinion is that we still have some distance to go – whether that is 6 months, 1 year or several, we are not completely out of the woods.  Based on my observations, I do feel that our local market has hit a flat spot and any decline has begun to slow or stop in some cases. Regardless, here is a

U.S. existing home sales rise in sign sector healing

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Posted on: 08-1-2009
Posted in: General real estate statistics

Tracking Home Mortgage rates Comments Off

How many of you know exactly what Home Mortgage rates are doing right now and where the experts think they are heading? If you are planning on refinancing, selling a  home or buying a home, this is one VERY important piece of information that you should get daily updates on.

Who has time for that you may ask? Norm Miron, with our local Wells Fargo office makes it VERY easy! Simply go to his website, click on the “Interest Rate Alerts” and sign up. It’s free & simple and every day about 1pm you will get an email with what the rates are for that day.

For me, as a real estate professional in the Chester County/Downingtown Area, I find it extremely helpful and interesting. I can tell you that rates have been pretty volatile as of late. In fact a few weeks ago we saw the 30 yr conventional rate go from 4.875% to almost 6% in one day. Now that has come back down and as of late they are at about 5.5%. But, I never know what my daily alert email will bring.

When rates jumped for a week or two, I heard a lot of fear from buyers I was currently working with. I shared with them a little perspective that even 6.5% is historically low. Take a look at the graph below.  Over the last 17 years, mortgage rates have averaged more around the 7% – 7.5% mark, so even 6.5% is still a point below the average. And when you look at the rates from a longer perspective, the lowest they have been in the last 50 years is about 4.85%. So if rates are historically low, where are they most likely to go in the future? That’s right UP. Take advantage while the getting is good.

I have also included a table that shows what the experts think the rates will do in the next 30 and 90 days. Most thing in the short term they will drop again, slightly. But then over 90 days, it’s a tie between drop or rise slightly. I always tell home buyer clients – when you try to “time” the market, you almost always loose.

If you are considering selling your current home and/or buying, feel free to contact me, Chris LaGarde, for a pressure free consultation. I would love to help bring clarity to your real estate decisions.

Mortgage rates over the last 17 years

Reproduced with the permission of Mortgage-X.com

Over the next 30 days: Over the next 90 days:
rates will rise significantly: 0.0% rates will rise significantly: 0.0%
rates will rise slightly: 30.4% rates will rise slightly: 34.8%
rates will remain unchanged: 17.4% rates will remain unchanged: 21.7%
rates will decline slightly: 47.8% rates will decline slightly: 34.8%
rates will decline significantly: 4.3% rates will decline significantly: 8.7%

See entire article from Mortgage-x.com



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Posted on: 06-26-2009
Posted in: General real estate statistics
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