MICHIGAN REAL ESTATE MARKET UPDATE

Posted on June 15, 2011 by admin

May 2011

It has been quite a while since the statement “things are remaining the same” was a good sign, but for metro real estate it is. Available home inventories continue to decline and the rate of sales are holding near the same annualized pace as last year, with the average price per square foot on the rise. There certainly is a chance of a double dip market decline, but with the current buyer activity levels and reduced inventories, that does not appear likely.

 Saleable listings and discounted bank owned are getting multiple offers and selling quickly. With so much activity focused on those segments, the best opportunities for bargains are homes that have been sitting on the market. Many are actually priced within their saleable range, but in outdated or poor condition. Using FHA 203K loans, a buyer can find a diamond in the rough, get a loan to cover the repairs and get a home at a great price.

For sellers, it is important to reinforce last month’s suggestion that now is the best time to test the market if you are considering selling your home in the next 12-24 months.

For buyers, with the most popular homes selling in days, it is important to understand the rules of the road when working with competing offers.

Be ready to move quickly be pre-approved for your mortgage. It is now officially OK to offer above asking price for the right home. Be ready to bridge the gap between your agreed upon price and the appraised value (because the next guy will if you don’t) Be sure to date and time stamp your various counter offers to ensure a backup offer does not slip in.

I heard an interesting economic theory recently, that the combined buying power of all of the former and current homeowners who are no longer paying their mortgage is the hidden growth engine driving our economic recovery. That may be exaggerated, but I don’t think too far from the truth. Over the next few years, as those former homeowners repair their credit, there will be a large wave of additional buyers re-entering the market.

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M.A.R.S. – Protecting Homeowners

Posted on June 6, 2011 by admin

FTC’s Mortgage Assistance Relief Services (MARS) Advance Fee Ban Takes Effect

The drop in home prices has forced many home sellers who want to sell but are “under water” with their mortgage to look to short sales. Companies have popped up offering to help these home owners negotiate with the banks to get them to take a short sale deal.  These companies have demanded an upfront “fee” to negotitate with the banks.  These “helpful” companies then take the home sellers fee & disappear into the night.  A new law went into effect in January of this year that is designed to protect those sellers who need to pursue a short sale.  There will be NO upfront fee. The FTC put out this announcement:

The advance fee ban under the FTC’s Mortgage Assistance Relief Services (MARS) Rule is designed to protect financially distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis.

“Banning the collection of up-front fees will protect homeowners from being victimized,” FTC Chairman Jon Leibowitz said. “This is especially important at a time when so many people are behind on their mortgages or facing foreclosure.”

As of January 31, 2011, companies that offer to help homeowners get their loans modified or sell them other types of mortgage assistance relief services are no longer allowed to charge up-front fees. Under the rule, a mortgage assistance relief company may not collect a fee until the consumer has signed a written agreement with the lender that includes the relief obtained by the company. When the company presents the consumer with that relief, it must inform the consumer, in writing, that the consumer can reject the offer without obligation and, if the consumer accepts, the total fee due. Before the consumer agrees to accept the mortgage relief, the company must also provide a written notice from the lender or servicer showing how the relief will change the terms of the consumer’s loan (including any limitations on a trial loan modification).

During the past three years, the FTC has filed 32 lawsuits against mortgage assistance relief companies for deception and abuse, and state law enforcers have filed hundreds of additional cases. The MARS Rule issued in November gives the FTC and the states an additional tool for combating deceptive and unfair acts or practices by these entities.

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How to Get Your Offer Accepted

Posted on May 31, 2011 by admin

Inventory is low, it has become difficult to find a house your think is just right for you.  You may have already found that house, but it received multiple offers and yours was not the one that was accepted.  So how can you avoid losing “the house” of your dreams and have your offer accepted?

 Cash is King!

With one in four transactions being impacted by a low appraisal, cash offers are much more desirable to sellers. An all cash offer eliminates the need for a bank appraisal.

Contingency Free

You should have gotten a mortgage pre-approval before you started looking at the first house. If you present that pre-approval and don’t ask for any contingencies such as, selling your house before you close on the house you wish to purchase, sellers will know you are a qualified buyer with no roadblocks to a successful closing

Sell the Old House First!

If you are looking for a new home before you have sold the one you are living in now and don’t have cash reserves to purchase the new one without a mortgage, you really aren’t a qualified buyer after all.  You won’t qualify for a 2nd mortgage on a new home until the old one is paid off/sold and closed.  Usually sellers will not even consider a contingency offer.

Have you lost your dream home because your offer wasn’t accepted?

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Michigan Real Estate Market Update-April 2011

Posted on May 27, 2011 by admin

April continued to show the strong activity level we have seen during the first quarter. The actual rate of sales on an annualized basis did slow however. It is too early to tell if that change is significant, it could have simply been weather related. Compared to last April sales were off about 15%, but last April was a peak tax credit month, so a 15% decline is not a bad number and not unexpected. In most every metro Detroit market we continue to see six year lows in the Months Supply of Inventory (MSI). It may be that some of the growth slow down from March to April was simply there were not enough salable homes to purchase.
   It is tough to tell just how much of the increasing activity could be a temporary spike vs. a permanent market uptick. We are certainly one of the strongest markets in the country. Regardless of which it might be, the strong activity makes this the best time to have your home on the market since 2005! So for anyone who is considering selling their home in the next 12 months, act now and act fast! Demand is rising; inventories are low as are interest rates.
   Even though values appear to be strengthening, Sellers will still need to set their prices based on the most current sales activity. A home that was on the market last year at $75,000 over the then current market will still be overpriced today. Home values are bouncing off the bottom of actual comparable sales, not what the asking prices have been. We don’t expect prices to jump dramatically (tough appraisal standards will keep a check on that) but there could be some nice bidding wars for well priced and conditioned homes bringing prices off their bottoms from last year.
   Another thing to keep in mind is that buyers are still being very picky. Homes that are not updated or in great condition are still sitting on the market or going for below asking price. If possible, a Seller might consider using a FHA 203K rehab loan as a refinance to help fund their updates for a more salable home.
   Another issue that has gotten some press is the MERS (Mortgage Electronic Registration System) foreclosure problem. The core issue is the willingness for title insurance companies to write a title policy on bank owned homes that used MERS in their foreclosure process. It is too early to tell if this will be a significant issue but there have been a few banks that have taken their homes off the market until they can determine their title insurance status. It may have the effect of squeezing the available home inventory even further and in some cases causing a postponing or canceling of a sale if title insurance cannot be provided to the buyer. For current Sellers it would be a good idea to have your old title policy handy just in case there was a MERS foreclosure in your title history.

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National Housing Survey: What America Thinks

Posted on May 24, 2011 by admin

Each quarter, Fannie Mae releases their National Housing Survey. They survey the American public on a multitude of questions concerning today’s housing market. We like to pull out some of the findings we deem most interesting each time it is released. Here they are for the most recent report:
The Most Important Reasons to Buy a Home
When we talk about homeownership today, it seems that the financial aspects always jump to the front of the discussion. However, the study shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, are:
It means having a good place to raise children and provide them with a good education
You have a physical structure where you and your family feel safe
It allows you to have more space for your family
It gives you control of what you do with your living space (renovations and updates)
The Home as an Investment
Though most people purchase a home for non-financial reasons, everyone realizes their is a money component to homeownership. Here is what they said on this issue:
66% of the general population (and 71% of homeowners) believe that homeownership is a ‘safe’ investment. This is the first time since the studies inception in 2003 that this number increased.
57% believe that homeownership has more potential as an investment than any other traditional asset class.
67% think that now is a good time to buy a home
Rent vs. Buy
We are always interested in the difference people see in renting vs. owning.
65% of renters have aspirations to someday own their own home
74% of renters think that owning is superior to renting (up 6% since the last survey)
96% of homeowners see homeownership as a positive experience (3% see it as a negative experience) while 82% of renters see renting as a positive experience (16% see it as a negative experience)
92% of homeowners live in a single family residence while 48% of renters live in a multi-unit building
Bottom Line
Our belief in the value of homeownership grows each time this survey is released.

Reposted from the KCM blog

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Michigan Continues to Add Jobs!

Posted on May 19, 2011 by admin

According to businessweek.com, Michigan’s economy is rebounding & will add 60,000 jobs per year, for the next three years, a university economist predicted Monday.

George Fulton of the University of Michigan said job growth will be steady but not spectacular, dropping the state’s annual unemployment rate to 10 percent this year and 9 percent in 2013. It was at 10.3 percent in March.

“Our view is that the Michigan economy is in the early stages of a sustained recovery,” but not everyone will enjoy the resurgence, Fulton told state economists at the Capitol.

“For many residents, the struggle will continue,” he said.

The rebounding domestic auto industry is helping the state get back on its feet as the Detroit Three have seen their first increase in market share since 1995, Fulton said. He expects all sectors except government to add jobs over the next three years, while teaching and government jobs continue to shrink.

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Michigan Job Gains at 10-year High

Posted on May 17, 2011 by admin

Michigan, which each suffered some of the worst job losses during the recession, is adding jobs again. Comerica Inc. Chief Economist Dana Johnson said: “With its manufacturing sector leading the way, Michigan is repeating the historical pattern of having a stronger recovery than the nation after having a much worse downturn.”

Michigan, meanwhile, added 71,000 jobs last year. That’s the first sustained job gain the state has had in the past decade, said Sophia Koropeckyj, a managing director at Moody’s Analytics.

Compared to a year ago, Michigan saw the biggest decline in unemployment, down a full 3.0 percent from March 2010. Michigan had led the states with the highest unemployment rate for 50 straight months during the recession but has experienced a steady recovery in the last year.

People are still being financially conservative, but the real estate market has certainly seen the effects of more people being employed and confident in the economy. Buyers are bidding against each other for the available inventory!  Sellers are “complaining” about all the showing their houses are receiving!  How confident do you feel about the housing market?

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Buy vs. Rent: These Days, Buying Wins

Posted on May 13, 2011 by admin

Our mortgage company brought a great article to my attention from CNNMoney.com about buying a home being preferable to renting. Let me know what you think!

For the first time in years, buying a home may beat renting. 

 Two factors are at play, according to researchers who recently crunched the numbers, Ken Johnson of Florida International University and Eli Beracha of East Carolina University for a paper to be published in Real Estate Economics.

 First, rents, though mostly stagnant the past few years, are expected to head higher as more people bitten by the housing bust turn to renting.  Rent could rise 7% in each of the next two years, according to Peggy Alford, president of Rent.com.

 Second, home prices have finally dropped enough to create a buying opportunity.  Nationally, prices are down 32% from their peak, set in 2006.

 The net result is that home price gains would need to average only 3.25% annually to beat renting, according to Beracha and Johnson.  To make the math work, you have to stay in the home for at least eight years. 

 Beracha and Johnson compared the cost of owning with the cost of renting.

 Renting has usually come out ahead, they say.  Buying typically leads to higher monthly and annual bills once all costs are factored in – mortgage payments, property taxes, maintenance and transactional costs.

 Those higher costs can be offset if the home gains in value.  But renters – the researches assume – can invest the savings.  And that is a big part of why the professors say renting has typically been the better deal.  “I was shocked at how often renters won,” said Johnson.

 Another reason had been the push to homeownership, which resulted in a premium on home values.  “My dad always told me not to ‘throw my money away on rent,’” said Johnson.  “This mania toward homeownership tends to drive prices up.”

Even in cities where people are, theoretically, better off renting, they may not be in reality.  Paying off a mortgage is a forced savings plan, said Baker.  The mortgage bill comes in every month, the homeowner pays it and the mortgage balance goes down.

 Renters, meanwhile, are just as likely to spend their savings.  They’ll wind up with less money than homeowners, which is kind of what your dad was saying all along.

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Houses Sell Twice Before Coming to the Closing Table

Posted on May 10, 2011 by admin

Once you “sell” (agree upon a price with a buyer) your house, you have to sell it again to the appraiser. 

Banks are much more careful to protect their investments in mortgages.  They want to ensure that the “product” (your house) they are using as collateral on that loan is secure.  If the bank is forced to take back the house, it will sell for an amount at least equal to the balance left on the mortgage

 This past week, the National Association of Realtors (NAR) released their Existing Homes Sales Report. In that report, they said: “11% of Realtors® report a contract was cancelled in April from an appraisal coming in below the price negotiated between a buyer and seller, 10% had a contract delayed, and 14 % said a contract was renegotiated to a lower sales price as a result of a low appraisal.”

1 out of 4 real estate transactions was either cancelled (11%) or renegotiated to a lower sales price (14%) because of a low appraisal!!

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5 REASONS YOU SHOULD CONSIDER SELLING NOW

Posted on May 6, 2011 by admin

The KCM blog makes some strong points for why RIGHT NOW may be the best time to sell!

If you plan on moving anytime in 2011, you should strongly consider selling your house now rather than waiting. Here are five reasons why:

1.) This is when your house will get the most exposure

Good weather brings most buyers into the real estate market. This surge of buyers dramatically increases the exposure for your house. The best chance of getting quality offers (perhaps even multiple offers) is RIGHT NOW!

2.) Foreclosures and short sales will probably increase.

There is still a large inventory of existing foreclosures and short sales that will still be coming to market.

When banks clear up their paperwork challenges a backlog of properties which will start coming on the market. These properties sell at dramatic discounts. They will be your competition.

3.) Interest rates have risen over the last six months

Interest rates have stabilized recently. However, in the last six months, interest rates have climbed over 1/2%. Every time the rates increase 1/4%, approximately 250,000 buyers are eliminated from qualifying for a mortgage. In an environment of volatile rates, waiting could mean that there will be fewer buyers eligible to purchase your house. It also could mean that you will pay a higher rate on the next home you buy.

4.) Qualifying for a mortgage is about to get even more difficult

Lending standards have been getting tighter over the last year. And as the government debates the new proposed guidelines (QRM), banks are gearing up for even more stringent standards.

5.) It’s time to get on with your life

Probably the most important reason to sell is so you can get on with your life. You placed your home on the market for a reason. Do not allow a less-than-stellar housing market prevent you from reaching your goals as an individual or as a family. If you have to take less than you were originally hoping to get for your house, you will make it up on your next purchase. 

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