How Labor Day can Effect Housing Affordability!

As we get closer to Labor Day, volume on Wall Street is dwindling as market players get a head start on their long weekend.

Today could be a difficult day to shop for mortgage rates and that can impact home affordabilility. 

Expect volatility.

This is because mortgage rates are based on the price of mortgage bonds and, on Wall Street, bonds trade a lot like stocks.

There has to be a buyer and a seller at a specific price to make a deal.

With so many traders on vacation today, though, there are fewer opportunities to match buyers and sellers.  This can cause mortgage prices rise or fall faster than on a "normal" day, directly leading to mortgage rate volatility.

Each 0.125% mortgage rate increase is an extra $96 cost per $100,000 borrowed on a principal + interest home loan.

For a light-volume trading day, there is a lot of information for markets to digest:

• The weather reports on Tropical Storm/Hurricane Gustav
  
• Reports that inflation is rising
  
• Reports that Consumer Spending is slowing
  
• Ongoing political tension between the U.S. and Russia

By themselves, each of these points can move markets. Together, however -- and aided by Labor Day -- they can move markets a lot.

Mortgage bond pricing is fluid, changing every minute of every day.  Today, those changes will be exaggerated and, as an example, in the first 30 minutes of trading, mortgage rate pricing swung from rate improvement to rate deterioration in a flash.

More Proof Real Estate is Local!

Stories on TV about the national real estate market are misleading to Americans.

This is because there is no such thing as a "national real estate market".

Consider the latest American Housing Survey. It found that there are 124,377,000 homes in America spread across:

• 50 states, with
• More than 30,000 incorporated cities, and with
• An innumerable number of neighborhoods

And yet, the media repeatedly groups all 124 million homes into one giant lump and then gives an analysis. No matter how you slice and dice the data, a home in Oregon can't be compared to a home in Mississippi.

This is why national real estate statistics are somewhat useless.

To get real estate analysis that matters, look local instead. And I don't mean stats from your state -- I mean stats from your neighborhood. It's the only way to know what's driving home prices on your street.

Unfortunately, finding local data like this isn't easy; it's far too narrow to be covered by the press. So, the best place to get local real estate data is from a local real estate agent or from somebody else with access to raw real estate data in and around your neighborhood.

By talking to "in the market" professionals that know your backyard, you'll get a much clearer picture of your local market -- good or bad -- than the national media could ever provide.

Real estate is a local market so your real estate data should be local, too.

Homeowners Benefit from Lower Housing Starts!

Housing Starts measure the number of new housing "units" on which construction has started and in July, Housing Starts fell to its lowest levels since March 1991.

For homeowners, this is a welcome bit of good news because as fewer homes are built, there is less inventory from which home buyers can choose, making their homes a more important part of the existing home inventory.

With fewer homes for sale, the supply-and-demand curve shifts in favor of home sellers and this adds a support floor for home prices. In addition, with less new construction , those homes built in the past few years become more attractive to potential home buyers who are looking for the newest home possible.

For home buyers, though -- and for the opposite reason -- the low number of Housing Starts may not be as welcome.

With fewer new homes on the market, owners of "used" homes may feel less pressure to lower their asking prices or to make other concessions to interested buyers. This means that home buyers may pay more for a home, or get fewer "throw-ins" on the contract.

For all of the hocus-pocus that surrounds real estate data, in the end, home prices are based on the supply of homes versus the demand for homes. When supply outpaces demand, home prices fall.

Homebuilders learned this lesson and July's Housing Starts data supports that.

(Image Courtesy: Wall Street Journal Online)

Forbes Says Philadelphia is a Great Place to Buy Real Estate

Philadelphia scores once again as a great place to buy property! In a recent article listing the top 10 cities to buy a home published by Forbes magazine, Philadelphia ranked as the fourth best place to buy a house in the U.S.

In this Forbes article, the ranking was determined by the cost of buying versus renting, tax incentives where present, and whether a buyer would have an opportunity to build equity. Forbes surveyed the 40 largest metropolitan area housing metrics looking for cities where [rices have appreciated over the last two years. It also measured vacancy rates, providing extra points where rents are significantly higher than a buyer's mortgage payment for the same home. Houston and Austin took the top 2 spots, due to their healthy job market and growing tax revenues.

Philadelphia's place was earned due to price stability, increasing rents and affordable housing stock.

Its a story you may have read here before, but its certainly nice to have an outside validation of my ongoing opinion that our marketplace is one of the really good buys around the country.

How Job Losses Can Help People Afford More !

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.

More commonly, it's called the "jobs report".

The jobs report is a sector-by-sector look into the U.S. economy and whether businesses are hiring -- or firing -- workers. This is one of the reasons why its release is so hotly anticipated each month -- the jobs report can reveal a lot about the state of the U.S. economy.

Last month, the economy shed 62,000 jobs.

Now, many people will assume that job losses like this are terrible for the U.S. economy. Sometimes, that's true.

This month, it's not.

Given the ongoing tug-o-war between inflation and recession, markets are somewhat pleased with the June job loss figures because job losses reduce the likelihood of inflation in the U.S. economy.

Inflation is considered by many -- Ben Bernanke included -- to be among the top threats to the U.S. economy -- it devalues the dollar and leads to increases in the Cost of Living.

Inflation also threatens home affordability because mortgage rates tend to rise when inflation is present.

June's job losses -- while bad for those impacted -- is helping to relieve inflationary pressures on the economy and that is boosting markets performance this morning. Stocks are slightly up, and mortgage rates are slightly down. Whenever mortgage rates trend down, the amount of house a buyer can afford increases, and in a time of stable prices, that means more house for your dollars.Publish Post

(Image courtesy: The Wall Street Journal)

Short Sales & Foreclosures in Philadelphia

During any market, good or bad, people look for bargains. In the current market, there is a lot of curiosity and interest by consumers in the difference between foreclosures ,pre-foreclosure properties and short sales.

Strictly speaking, every property is a pre-foreclosure property. The term however is used to indicate a home where the homeowner is in default under the current mortgage, and the next step for the lender might be to begin the foreclosure process. Once a lender begins the foreclosure process, they have taken steps to secure the property which was pledged as security for a debt which is now delinquent. In Pennsylvania, this process culminates in a Sheriff Sale. At the Sheriff Sale, the bank will bid an amount equal to the debt, the delinquent interest, the late fees and all of the costs incurred taking the property to the sale. If there is a third party who bids a higher amount, they will be the purchaser at the sale. The amount bid by the lender is not related to the market price of the property, but to the outstanding debt. Once the lender owns the property, they will evict any tenants (or former owners) and then price the property at a market price and begin to market the property.

Short Sales were formerly fairly rare, but with a higher level of delinquencies, have now become a portion of the real estate market. The actual of a short sale is a sale where title has transferred; where the sales price was insufficient to pay the total of all liens and costs of sale; and where the seller did not bring sufficient liquid assets to the closing to cure all deficiencies. As you can see, this is a situation where settlement has already occurred. More properly, what most buyers get involved with is a potential short sale, which is one where the listing (and/or selling) agent reasonably believes the purchase price may not be enough to cover payment of all liens and costs of sale and the seller is unwilling or unable to bring sufficient liquid assets to the closing.

These sales require a buyer with a lot of patience, a cooperative seller, and a listing agent with a lot of persistence since the process involves not only the agreement of the seller, but the approval of the lender, who is probably receiving less then the amount they are owed. Approval of a short slae by a lender may involve not only the primary lender, but possibly approval for other individuals who have an interest in the original mortgage loan, or possible releases from lenders who hold junior liens (liens that were recorded after the first delinquent loan). In the current market, many lenders are more responsive and more flexible then formerly, but the process still varies from lender to lender, and approval times can be anywhere from two weeks to as much as 4 or 6 weeks.

While I might not avoid a property that was a potential short sale, I would, as I said before, be prepared to be very patient, and to determine prior to making any offer, just how ready I was to wait as long as it takes to get an answer.

What's the Job?

The job of the real estate salesperson is one of the most misunderstood jobs in America. Most sellers think that the job of the real estate agent is performed by placing a sign on a property and waiting for someone to come in to their office to buy the property.
In reality, the real estate agent and their firm perform a variety of jobs for the seller. These jobs are all aimed at helping to facilitate and coordinate the activities of the real estate marketplace.
This is more than just showing the property. It means the marketing efforts which are used to promote the property to other agents and their firms as well as the end user. Much of the agent's work involves these indirect marketing efforts. For example a salesperson will usually have to fill out the forms to submit the property to one or more Multiple Listing services. The agent will also usually have to design and complete a highlight sheet to be used by salespeople who are showing the property. They may design a flyer to be sent to other offices to promote the listing. The agent should schedule the property to be previewed by the agents of their firm. They will either place a sale sign, or arrange for one to be erected if the seller permits. The agent will arrange for property descriptions to be distributed to the agents in their firm, detailing the special instructions for appointments. If the property is to be marketed at an open house a more complex marketing tool is usually designed to be distributed to buyers, and additional signs and advertising is scheduled for the event.
When other agents wish to see the property, the agent will schedule the appointments at the seller's convenience, and then follow up the appointment to discern what if anything can be done to make the sale to that buyer, or to increase the marketability of the property for other prospective buyers.
If the property is not being shown, or offers are not forthcoming, the agent should recommend some adjustment in the marketing situation. Either a price adjustment or some cosmetic changes or some change in the advertising program.
When offers on the property do come to the seller, the agent will review the terms and conditions, and should advise the seller of any potential problems, or guide them through the counter offer process.Finally the agent will assist the seller during the period between acceptance of an offer and the time of final settlement, explaining all of the documentation, obtaining inspectors or contractors, and representing the seller at the settlement table.