According to the NATIONAL ASSOCIATION OF REALTORS®, potential buyers are still holding out buying homes until they see more stability in the housing market. This is evidenced by the slight easing of home sales in May.
NAR senior economist, Lawrence Yun, said “I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,”. Yun also said that household formation has slowed dramatically since late 2006, implying that many people are adding roommates or moving in with parents. Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — eased by 0.3 percent to a seasonally adjusted annual rate of 5.99 million units from an upwardly revised pace of 6.01 million in April. Last month’s sales were 10.3 percent below the 6.68 million-unit level recorded a year earlier. The national median existing-home price for all housing types was $223,700 in May, a 2.1 percent drop from May 2006 when the median was $228,500. The median is a typical market price where half of the homes sold for more and half sold for less, but there is a temporary downward distortion in the current national comparison because sales have shifted away from many high-cost markets in the past year. “The market is underperforming when you consider positive fundamentals such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices,” Yun says.
Basically, this means that the buyer is in the “driver’s seat”. Total housing inventory rose 5.0 percent at the end of May to 4.43 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace, up from an 8.4-month supply in April. More homes are staying on the market longer.
In regards to mortgages, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.26 percent in May, up from 6.18 percent in April, according to Freddie Mac. That compares with a rate of 6.60 percent in May 2006. This translates to the fact that this year is a better year to buy a home then last year.
“Although mortgage interest rates are trending up, they are historically favorable,” Pat V. Combs, NAR President, said. “The good news is buyers have more negotiating power with a fairly large supply of homes available in much of the country. Buyers who’ve been on the sidelines may want to take a closer look at current conditions in their area —if they wait for sales to rise, their choices and negotiating position won’t be as good as they are now.”
Again, what does all of this mean to buyers in Southern New Jersey?
Homes are still increasing in price, although slightly. Existing-home sales in the Northeast rose 5.8 percent to a level of 1.10 million in May, but are 3.5 percent lower than they were in May 2006. The median existing-home price in the Northeast was $282,700, which is 0.5 percent higher than a year ago. Do you wait? No. Although home prices are slightly higher, sellers are beginning to realize that they must be in a position to negotiate with potential buyers. Sellers are slowly begininng to accept the fact that their homes must be priced to sell.
<span style=”font-size:78%;”>Source: Daily Real Estate News June 25, 2007</span>
I decided to wait until all of the hullaballo was over regarding the 60 Minutes segment on real estate from a few weeks ago. It is amazing that in the State of New Jersey, we REALTORs must abide by a very strict Code of Ethics. This same code states that we will not conduct our business whereby we put down our competitors with false and misleading statements. Violation of this specific provision could end you in front of a Grievance Committee of the local Board, which could result in your license being suspended (causing you to lose your means to pay your bills and support your family). So, NJ REALTORS take great pains not to conduct themselves in this manner. Based on what some other competitors, who do not belong to any Board, do to enhance their own “value” by spreading false and misleading statements this put REALTORS at a disadvantage. That’s why I was happy to see the following spoof put on YourTube about the biased reporting on the specific 60 Minutes segment.
BTW, for the record:
1. We don’t own a boat.
2. We don’t own a summer/vacation home.
3. We want to run our own business and don’t want to have to follow anyone else’s unethical agenda. (We’ve both worked in the corporate world and debacle of 2001 with Enron, Worldcomm, etc. didn’t surprise us…we just wondered why it took so long).
3. And our income is just slightly over the national average.
When speaking with many people who would like to buy a home, most have expressed reservations. The primary objection for making a move now is motivated by fear. Most are afraid that if they buy a house now it will be worth less than they paid for it in a year. They don’t want to be stuck with a house that they cannot sell for what they paid for it.
The present state of the market is a direct result of the huge numbers of risky, sub-prime mortgages that were written just a few years ago. People who bought their homes with no money down, with adjustable rate mortgages, basically deferring the interest on their loans to the future, are the very people who are in trouble now. These people bought homes that they clearly could not have afforded to purchase with a fixed rate loan. When the mortgages they acquired began to adjust (that is what an adjustable loan means), their monthly payments rose significantly and they could no longer meet their monthly obligations. As a result of this, the rate of foreclosures has reached a 40 year high.
The fallout of the huge number of loans in foreclosure has been the tightening of the mortgage market. What have disappeared are all those risky loans. They are just not there anymore. In a way, that is the best news. Now that the market is not flooded with buyers looking to buy homes they cannot afford, a more realistic market has emerged.
Sellers are forced to sell their homes for what they are really worth, not the over inflated prices that were prevalent during the ‘boom’. With government looking into the practices of lenders, appraisers and realtors, the return to sanity has arrived. A person who enters the home buying market today is in a much better position than they would have been just a few years ago.
Fixed rate mortgage rates are very good, still under 7%. When I purchased my first home I paid 7 ½ percent, that was in 1971. When I bought my second home, I paid 8 ¾ percent and that was in 1976 and I paid 11 percent in 1990. There was even a period of time when the interest rates hit 19% in the early 1980’s. Interest rates are always fluctuating, but the constant is that property values steadily increased. That first home that I paid $21,000 for in 1971 is worth $200,000 for in today’s market. Had I stayed in that home for 30 years, I would have paid off that home 6 years ago.
There is plenty of mortgage money available. You can still buy a home with as little down as 2.25% with an FHA Fixed Rate Mortgage. Veteran’s can still buy with no money down. In today’s market many sellers are helping buyers by paying part of the buyers closing costs in order to get their homes sold. In other words, sellers are more realistic in the pricing of their homes. That is great news for buyers.
We’re looking at an historical moment right now with phenomenally good prices and interest rates, and there’s a point where, if you wait too long, the rates are going to start going up and you will have lost out.
Once a home is placed on the market for sale, the majority of the showings will occur in the first 30 days. If the house is priced too high the number of showings are significantly decreased. If a home is priced just 10% over market, chances are the house will get very few showings and no offers. For every day over 45 days a house stays on the market the likelihood that the house will sell near asking price is reduced.The closer the home is priced to market, the more likely it is to sell within 98-99% of original asking price and netting the seller more money in the end.
Right pricing is even more important if you are buying another home and need the sale of your existing home to complete the transaction. Losing a home you love because you could not sell yours is heartbreaking.
Stumble It!