When will home prices begin to increase?
Nationwide, the US housing market remains deep in the doldrums and economists expect prices to fall another 5% to 10% in many places.
When the rebound arrives, desirable zip codes will see price jumps first. Real estate is always local.
Here are a few things to start watching in your neighborhood:
How fast are homes selling? It is a good sign when price drops slowly down, inventory levels are actually a better gauge of where your market is headed. Ask a Realtor to tell you the number of listings now on the market in your area and the number of homes sold over the past year. An example would be that there are 100 listings and there were 240 sales last year, or an average of 20 per month. That equals a five-month supply, which is considered stable. More than six months and it’s a buyer’s market; less than three and sellers probably have the upper hand.
Compare your neighborhood’s price-to-rent ratio with what it was before the housing boom. Calculate the price-to-rent ratio, or the price of a home divided by one year’s rent on a comparable one. In general, it’s cheaper to buy when the price-to-rent ratio is below 15.
A decrease in foreclosure filing is often an encouraging sign but not always the case depending on the processing delays in foreclosures. Distressed owners tend to fall behind on lawn cutting and house painting long before a foreclosure. If you see several places in disrepair, don’t expect your home value to rise soon.
If you area is a prime location. As buyers return, they naturally grab places with short commutes and better schools and amenities which will help increase the sales price.
August Foreclosure Statistics
Foreclosure filing rose in August, as more homeowners fell behind on their mortgage payments.
Filing were up 7% compared to July, but were still 33% lower than a year ago.
According to Realty Tract’s report, 228,098 homes in the US received some kind of foreclosure filing in August. Foreclosure auctions and bank repossessions, which come later in the process, both fell slightly.
The increased in default notices may signal that lenders are starting to finally push through foreclosure paperwork that was previously delayed by “robo-signing”.
The good news is that bank repossessions have been falling. Lenders repossessed 64,813 homes in August, a six-month low and a 37% decline after they hit a peak in September last year.
Meanwhile, foreclosure auctions were scheduled for 84,405 homes, the lowest number in more than three years.
Nevada, California and Arizona housing markets are the hardest hit by foreclosures.
Information from CNNMoney.com
Loan Modification Scammers
One in 240 California housing units was in foreclosure in April 2011, according to Realty Trac, a statistic that places California foreclosures about 2.5 times higher than the national average. Those statistics alone make the state a ripe market for loan modification scammers.
The Lawyer’s Committee is starting to file complaints against Nathanson Law Center and other alleged loan mod scammers. The suit claims that the defendants lured desperate homeowners into paying up-front fees to secure them loan mods, and then did little or no work to follow up on their promised services. While homeowners were offered 100% guarantees that their funds would be returned if a modification could not be obtained, the defendants later refused to turn their fees. Many of the victims lost thousands of dollars – or worse, their homes.
If you believe you have been the victim of a loan mod scam, you are encouraged to call (888) 995-HOPE or visit www.preventloanscams.org and click “Report a Scam!” Victims are being represented free of charge.
Six Mistakes Investors Make
Investing in real estate right now can be surprisingly profitable as rents are on the increase in many areas due to the number of people losing their homes to foreclosures or doing a Short Sale of their homes.
Remember that owning rental property is time consuming, expensive, challenging, and many investors lose money.
Mistake 1: Confusing a cheap deal for a good deal – You can buy homes at a low price but that doesn’t mean you can rent them out. They usually aren’t any more appealing to rents than they are to buyers. Also less-desirable school districts may hamper renting your property.
Mistake 2: Overlooking key costs – Knowing potential rent is not enough. You should also factor in closing costs 3-6%, costs to fix up the place and maintain it, and your holding costs.
Mistake 3: Forgetting that time is money – You lose money when your home is empty, whether you are trying to rent it, in between tenants or painting. You may be better off accepting a lower rent than waiting for a higher-paying tenant.
Mistake 4: Assuming you will sit back and watch the rent roll in – You are a rent collector and sometimes tenants lose their jobs and stop paying rent. Evicting them can take several weeks without rental income coming in.
Mistake 5: Underestimating repair costs – Carpet in rentals typically must be replaced every five years and you may have to repaint after every tenant. The National Association of Residential Property Managers suggests setting aside six months of expenses so that you will have funds if a major repair is needed.
Mistake 6: Assuming that owning a rental is the same as owning a home – You might put up with flaws in a home that a renter won’t tolerate. A property manager can handle most headaches, but you should expect to pay up to a month of rent for finding and screening tenants and up to 10% of the monthly rent for management fees.
Homeownership Purchasing Hurdles
Harris Interactive, a market research firm’s bi-annual survey on purchasing a home found the following from a recent online survey:
Among renters, 59% said they aspired to own a home, but of those, 51% said saving enough for a down payment was their biggest obstacle.
Those in the 18-34 age group cited the following concerns: 62% saving down payment, 36% qualifying for a mortgage, 34% having poor credit, 31% in ability to pay off existing debt, 29% not having a stable job and 13% declining home values.
Both the 18-34 and over 55+ age groups expressed preferences that indicate they prefer to live in urban centers: The younger group preferred short commutes to work and the older group preferred the proximity to restaurants and shops.
The majority, 70% of respondents said owing a home is part of their American dream. This attitude toward homeownership rose with age, from 65% of 18-34 year olds to 76% of those 55 +.
Among current homeowners, 80% said they plan to buy another home in the future and 57% said owning a home is among the best long term investments.
