Housing: The Reasons It Is Coming Back

 

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Once again, my pals at KCM get it right, and put it so succinctly. I just had to pass it on.

Monday, we told you that many experts are beginning to call a bottom in house prices. Why? Writing in the Financial Times, Roger Altman, former deputy Treasury secretary, explained why he is so bullish on housing:

“This surge will be driven by a combination of improving house prices, a lower inventory of homes for sale, rising rates of household formation and population growth, and improving access to mortgage credit.”

Altman gave his thoughts on each point:

PRICES

“The S&P/Case-Shiller Composite 20 City Home Price index has risen 8 per cent since March. Indeed, Barclays has projected that, by 2015, nominal home prices will exceed their 2006 peak. Home affordability is also way up, as the ratio of mortgage payments to both income and rents has never been more favourable. Moreover, the relationship of home prices to household income is back to the level of 30 years ago. Rising prices and affordability, of course, lead directly to the buying and building of homes.”

HOUSING INVENTORY

“The levels of relevant supply have fallen sharply. The number of homes for sale has fallen back to its long-term average of 2m. Yes, there is a larger “shadow inventory” of homes that are in foreclosure or carry delinquent or defaulted mortgages. However, many of these are distressed, in that they have not been physically maintained. This means that the supply has become two-tiered – quality homes and distressed homes. For most buyers, only the first of these two markets is relevant and the supply there is approaching its lowest level since 1992.”

POPULATION GROWTH

“Housing demand is going to be strong, driven by demographics. The International Monetary Fund forecasts that the US population will increase by 15m during the 2012-17 period, more than the increase of the past five years. The two groups of the population that are growing fastest are the over-55s and the so-called echo boomers, the grandchildren of the baby-boom generation. The first group has the highest rate of home ownership. The second has been renting disproportionately, and is primed to start buying. JPMorgan estimates that 6m new units of housing are needed by 2017 just to serve the bigger population.

HOUSEHOLD FORMATIONS

“There is the coming recovery in household formation. According to JPMorgan, this rate was steady at about 1.4m annually from 1958 up to 2007. But, it plunged below 500,000 for the three years following the financial crisis, as young people moved in together or lived with parents. Now it has doubled from that level and estimates of pent-up households are at an all-time high. Most expect formation rates to rise much further still, exceeding the 50-year average for a few years.”

IMPROVING ACCESS to MORTGAGE CREDIT

“The availability of mortgage credit is starting to improve. Underwriting standards tightened sharply following 2008 and the proportion of home sales that are financed by new mortgages is now at a 10-year low. However, household finances have improved sharply, with debt service ratios returning to pre-crisis levels. Moreover, banks also need the income from originating mortgages. Mortgage credit availability is therefore opening up, which also boosts home sales.”
It seems apparent that many aspects of the housing market are in the process of turning much more positive.

SOURCE: KCMBLOG.COM

Color Matters….if your house is Turquoise, Pink or Chartreuse

Color Matters….if your house is Turquoise, Pink or Chartreuse .

There are as many prognosticators, opinions, graphs and charts which attempt to explain why a house sells or does not sell – as there are unsold houses. I try to digest all the pertinent info that my stomach can take, and then see how it relates to our local market, because, yes….all real estate is local. One thing is for certain…if the exterior of your home is Turquoise, Pink, Chartreuse (or any odd color at all) you are going to have a tougher time unloading it than if it were a simple Nantucket-Gray-with-White-Trim. There are several colorful examples here on the North Fork – we’ve all driven by them. The For Sale signs have been out front for so long, they seem part of the landscape. I’ve had occasion to get inside most of these homes and I must say --- the interiors are more often than not, a revelation. While the curb appeal of a Magenta house is limited – I’ve had buyer-husbands refuse to even get out of the car – so often the interiors are well-appointed, stylish, dream homes. Too bad that limited-appeal exterior color is keeping buyers away.

Interior paint jobs are something a potential buyer often figures into his move-in costs: A-no-big-deal-freshening-up-job which he can even envision himself enjoying on weekends (ha!!!). Painting the exterior of a house is a whole ‘nother kettle of fish. Gotta get a pro for this. Could cost thousands. This mode of thought is also the reason the current owner/seller has not undertaken the job himself. (Even though his last 3 realtors have suggested it.) Meanwhile, time marches on. The exterior is now, not only Turquoise/Magenta/Chartreuse, it’s faded and dingy, less appealing every day, while all the Gray houses in the neighborhood have sold.

If your odd-colored home has been languishing on the market, I have a piece of advice for you: “If 3 people tell you you’re drunk, lie down.” Paint the house Gray, White, Beige and be done with it. Take some fresh photos, market it like a new home and SELL THE THING!!!! 

 

I would also bet you can find a painter willing to play Let’s Make a Deal, and take half upfront and half when that “SOLD” sign goes up in front of your freshly painted Nantucket-Gray-with-White-Trim house.

 

 

WHY NOW IS THE TIME TO SELL

The KCM CREW is at it again, distilling real estate information down to its most important core. Here is their take on Selling:

Many sellers feel that the Spring is the best time to place their home on the market as buyer demand increases at that time of year. However, the Fall and Winter have their own advantages. Here are five reasons to to sell now.

Only Serious Buyers Are Out

At this time of year, only those purchasers who are serious about buying a home will be in the marketplace. You and your family will not be bothered and inconvenienced by mere ‘lookers’. The lookers are at the mall or online doing their holiday shopping.

There Is Far Less Competition

Housing supply always shrinks dramatically at this time of year. This year will be a little different as some of the distressed properties being liquidated by the banks (in the form of foreclosures & short sales) will enter the market. However, for those buyers looking for a non-distressed property, the choices will be limited. Don’t wait until the spring when all the other potential sellers in your market will put their homes up for sale.

The Process Will Be Quicker

One of the biggest challenges of the 2012 housing market has been the length of time it takes from contract to closing. Banks have been inundated with both purchase and refinancing loan requests. Both of these will slow in the winter cutting timelines and the frustration these delays cause both buyers and sellers.

There Will Never Be a Better Time to Move-Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by over 15% from now to 2016. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30 year housing expense with historically low interest rates right now. There is no guarantee rates will remain at these levels in years to come.

It’s Time to Move On with Your Life

Look at the reason you decided to sell in the first place and decide whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
You already know the answers to the questions we just asked. You have the power to take back control of the situation by pricing your home to guarantee it sells. The time has come for you and your family to move on and start living the life you desire. That is what is truly important.
SOURCE: KCMblog.com

5 Reasons to Buy a Home Now

 

Once again, the folks at kcmblog.com make some very smart points:

Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying:

Supply Is Shrinking

With inventory declining in many regions, finding a home of your dreams may become more difficult going forward. There are buyers in more and more markets surprised that there is no longer a large assortment of houses to choose from. The best homes in the best locations sell first. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy.

Price Increases Are on the Horizon

Prices will bounce along the bottom this winter. However, projections call for appreciation after that. Several studies and surveys call for price increases over the next few years starting in 2013. One such survey shows that prices will increase over 10% by 2016.

Rents Are Skyrocketing

Rents historically increase by 3.2% on an annual basis. A study issued earlier this year projects rent increases of 4% for the next two years. Trulia recently reported that rents this year have actually shot up by 5.4%.

Interest Rates Are at Historic Lows

Federal Reserve Chairman Ben Bernanke has kept interest rates low in an effort to stimulate a lethargic economy. He understands that low rates will help housing and housing is a key to bringing back the economy. As the economy approves, the need to keep rates low will no longer exist. The 30-year-mortgage rate before the financial crisis was 6.57% (August 2007).

Buy Low, Sell High

We would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’. It’s time to buy.

source: KCMblog.com

A Storied Past

Don’t you ever wonder what’s behind the curtains? What secrets are kept hidden by the rows of tall privets? Every house has a story. Some are better than others. This one is pretty good.

The brick manse in that trophy spot set in the middle of New Suffolk, has a tale to tell. Known as The Lyndon Tuthill-Floyd Houston House, it was built in 1936, for Lyndon Tuthill. It is said that the project was initiated to lift people’s spirits and provide much-needed jobs for the Depression-ravaged tradesmen in the area.

After Lyndon’s early passing, it was occupied by his sister, Ruth, and her husband Floyd D. Houston until the 1980s.

Floyd Houston worked extensively in the NYC maritime and was the director of Civil Defense in Eastern Long Island during WWII. He eventually moved to New Suffolk, where, from 1945-1979, he owned and operated the Goldsmith-Tuthill Shipyard (founded in 1842). New Suffolk was quite a hopping spot in those days: dancehalls, hotels, loose women – it was also the location of the first Submarine Base in the country: The Holland Torpedo Boat Station, where the nation’s  first submarine, the USS Holland, had its earliest trials. This was the perfect spot for Floyd, an avid amateur historian, specializing in early submersibles. He was a gifted craftsman, building models for the Navy and Naval Museums across the country, including the USS Holland. Floyd passed on in 1984, at the age of 86, and rests at sea, in his beloved Atlantic. According to his grandson, “He was a scholar, craftsman, and an irascible old salt.” And he and Ruthie lived in high style, in that red brick mansion.

Situated on 2.7 pristine acres in the heart of the tranquil bayside hamlet of New Suffolk, The Lyndon Tuthill-Floyd Houston House is red brick with white trim, green shutters and a slate roof. It is a 2-and-a-half story, 3-bay, center entrance, gable-roofed, Federal style house, with end chimneys and attached 1-story brick garage in rear. There are quadrant windows in the gables. The main section of the house is flanked on both sides by 1-story, flat-decked wings with Chippendale railings. There are 3 bedrooms and 2.5 baths. Both the sunroom and the large, sunny, updated kitchen open onto a bluestone patio, surrounded by specimen trees. You can cozy-up by the fireplaces in both living room and library. The basement, with its splendid staircase and 12” thick walls is unique in residential construction. The pristine, detailed woodwork and handsome arched doorways throughout the home are graceful remnants of another time.

The residence was built entirely with bricks from the now-abandoned brick factory on Robins Island. There is an oyster shell base under the driveway’s blacktop. Every closet in the house is cedar. There is a servant’s bell on the dining room floor, conveniently positioned at the head of the table.

The Tuthill-Houston House is newly priced at $1,395,000.

Give me a call. I'll be happy to schedule a private viewing of this beautiful home - perhaps you'll write your new history here.

Another Positive Report for Real Estate

The good folks at KCMblog have some positive news to start the week off!

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We often report on shadow inventory and its impact on home prices. We are pleased to announce that CoreLogic just reported that the amount of shadow inventory has fallen to levels not seen since 2008.

Mark Fleming, their chief economist, explains:

“Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent. The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices. This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases.”
SOURCE: KCMblog.com

Everybody Calm Down! The Sky Is NOT Falling

The Crew at KCM know that cooler heads prevail, so here is the view from their perch.

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After weeks of continuous good news about the housing market, the naysayers jumped all over this month’s Pending Sales Report from the National Association of Realtors (NAR). Pending sales were down from the previous month. This must be proof that all that other positive news on real estate should be ignored – right? WRONG!!
It is true that this month’s numbers were down from last month. However, we must realize we are comparing the numbers to the best month in two years. The numbers are 14.4% higher than the same month last year. Below is a graph showing the pending sales numbers over the last two years. You can decide whether it is showing a recovering market or not.

source: KCMBLOG.com