The May Market Report

RMLS released the May Market Action report. Here’s my quick conclusion:

The 2009 market is more or less stabilized. Inventory is being absorbed, which will eventually bring balance back to the market. Sales activity is up with sales price staying constant. However, 2009 market activity is down about 25% compared to last year. That’s actually an improvement over the previous months where the 2009 market was down about 33%.

Obviously buyers and sellers are most interested in prices and the 12-month average sales price is down about 8%. From my own experience, that feels about right.

For details or to read my complete breakdown, please click here.

On the Rate Roller Coaster – Part II

In a surprise to no one, mortgage interest rates are on the rise. Many factors have gone into how the powers that be have artificially held rates down, but those efforts can’t last forever. With the economy in it’s current state, it’s absolutely zero surprise that rates are beginning to rise.

What is a little surprising, though, is just how quickly they’re rising. Rates took nearly a half point jump late last week.

For some perspective, here’s what that means to one of my first time buyers.

Last week: Pre-approved for a loan up to $400,000 at 5.175
3.5% down = roughly $2113 per month

This week: Pre-approved for up to $350,000 at 5.75
3.5% down = roughly $1971 per month

So that interest rate hike means that this particular client QUALIFIES for $50,000 less. Now the good news is that my clients do not want to go over $350,000 anyway. However, if you compare apples to apples, here are the payment scenarios at $350,000 with the two different interest rates.

$350,000 $350,000
3.5% down 3.5% down
30 year term 30 year term
5.175% 5.75%
$1849 $1971

A $122 monthly difference simply due to interest rate!

I know a lot of people out there have been trying to time the market. They want to buy when prices hit rock bottom. Unfortunately, most of those people don’t take into account the volatility of interest rates. As you can see, a small change in rate can have huge effects on payments.

Disclaimer: All calculations are simply estimations, not to be considered factual.

Up, Up, and Away! Pending Home Sales on the Rise

We interrupt all the doom and gloom news to (finally) bring you some good news; pending home sales are up!  Actually, this is the third straight month that pending sales have grown. 

The industry views pending sales as a great future indicator, as pending sales can take a few weeks to a few months to close.  That’s really good news for the summer economy. 

With the high rate of housing affordability (a good thing for buyers), the historically low interest rates and the $8000 first time buyer tax credit, the time is right for a market improvement.  That improvement seems to be happening and all signs point to a stronger improvement on the horizon.

First time home buyers need to close escrow by the end of November in order to receive the one time tax credit, so I fully expect a sharp rise in first time buyer sales in the coming months.

The ‘Plex Strategy

First time home buyers are an interesting breed. They encompass myriad personalities, strategies and desires. Many are newlyweds looking to get out on their own to start a life together. Others are single up-and-comers ready for the challenge, and joy, of home ownership. Others still want are eager to be first time investors, as well as first time buyers.

There are a number of good strategies for first time buyers, but one often overlooked property is what I lovingly call, The ‘Plex. Most home buyers tend to lean towards single family homes. That’s fine. Often, though, these same buyers are looking for properties with separate living areas, finished basements with separate entrances, mother-in-law units, etc. Usually, these buyers are looking to subsidize a portion of their mortgage through a renter. That can be a great idea.

If you’re thinking about buying a property and bringing in a renter, you should consider a duplex or triplex. A ‘plex gives you the same advantages as a single family home (tax deductions, pride of ownership, privacy, etc.), but has the additional advantage of providing a truly separate living space that can be rented.

To discuss this strategy or to see some real world numbers, give me a call or email.