How an offer is made has a lot to do with the outcome:

* Sellers are more comfortable with an offer if they know the buyer is qualified and eager to close.

* A buyer’s agent can help. When the agent presents the offer in person, the seller can ask questions that could lead to a favorable decision.

* A real estate agent essentially does the same. Though a real estate agent is working for the seller, the sale is still a primary goal.

* Always present your offer to the seller in person. Don’t fax.

* Some sellers don’t want personal contact with buyers. If you use a buyer’s agent, be sure the offer is presented in person to the listing real estate agent.

* When a real estate agent requests that offers be presented in a sealed envelope, ask the real estate agent to prepare a summary to accompany the offer. The summary should tell something about you and highlight positive aspects of your offer, such as an early closing date.

* However your offer is presented, your chances of acceptance are improved by including a copy of a preapproval letter from a mortgage company.

* When multiple offers are involved, some buyers write a letter to the seller to personalize their offer. It won’t help if you aren’t qualified or if the offer is too low.

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Modest near-term movement is expected in existing-home sales, with a recovery in sales seen during the second half of the year. The Pending Home Sales Index, NAR’s forward-looking indicator based on contracts signed in May, fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5. Some pullback after a sharp increase in the previous month was expected. The overall decline in contract signings suggests we are not out of the woods by any means. The housing stimulus bill that is still being considered in the Congress is critical to assure a healthy recovery in the housing market, jobs and the economy.

But location has never mattered more than in the current market. Look at the pending home sales index for the West. While it’s true the index slipped 1.3 percent to 97.5 in May in that region, it was 2.0 percent higher than it was in May of 2007. Indeed, some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. For instance, double-digit pending sales gains in May from a year ago were noted in Colorado Springs CO, Sacramento CA and Spartanburg SC. In addition, price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.

Current real estate market conditions are positive for most buyers: still-attractive interest rates, a large inventory of homes available for sale, and many sellers willing to negotiate their prices – sometimes significantly. And in spite of the headlines surrounding issues with Fannie Mae and Freddie Mac – as well as the recent federal “takeover” of IndyMac – there is still mortgage capital out there. Credit may be tightened, but lenders are still happy to originate a mortgage loan to households who qualify. And remember: owning a home still provides long-term value – and most buyers today plan to remain in their homes for five or more years. Home buyers can get a great deal right now.

Concerns Remain

Yes, there are some concerns on the horizon. Although inflationary expectations appear to be under control for the time being, sharper consumer price gains could lead to notably higher mortgage interest rates in 2009. Based on current indicators, the 30-year fixed-rate mortgage is forecast to rise gradually to 6.5 percent by the end of this year, and then hold at that level for most of 2009. But note – that is still well below the “threshold” level of 7 percent. In spite of a month to month decrease from April to May, housing affordability – as measured by NAR’s housing affordability index — is improving this year and is likely to rise 15 percentage points to 127.0 for all of 2008.

Existing-home sales are expected to grow from an annual pace of 5.01 million in the second quarter to 5.75 million in the fourth quarter. For all of 2008, existing-home sales should total 5.31 million, and then increase 5.0 percent next year to 5.58 million. That is less than 100,000 unit sales off the annual pace last year.

The speed at which home prices have declined in a few select markets is unprecedented, but the large price declines in those areas have enticed bargain hunters back into the market. Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets. The aggregate median existing-home price (on a national basis) is projected to fall 6.2 percent this year to $205,300, and then rise by 4.3 percent in 2009 to $214,100.

New-home sales are a different story. They are likely to fall 32.3 percent to 525,000 in 2008 and decline another 3.4 percent next year to 507,000. In light of high inventory conditions, rising commodity prices and construction costs will curtail new home construction deep into next year. Housing starts, including multifamily units, will probably fall 28.7 percent to 966,000 this year, and then drop another 9.0 percent in 2009 to 879,000. The precipitous drop in starts is due in part to some overbuilding during the “boom” years, as well as the rising costs of construction. The median new-home price is expected to decline 3.2 percent to $239,300 this year, and then rise 5.3 percent in 2009 to $251,900.

Officially, the U.S. economy has still not drifted into recession. In fact, GDP growth in the first quarter of this year was revised upward from preliminary estimates – albeit at a slow 1.0 percent rate. Growth in GDP is forecast at 1.6 percent for all of 2008 and 1.4 percent next year – not spectacular, but still positive. Inflation, as measured by the Consumer Price Index, is forecast at 3.7 percent this year and 2.4 percent in 2009. Unfortunately, personal income gains are unlikely to keep pace with rising prices. Inflation-adjusted disposable personal income is projected to grow 1.5 percent in both 2008 and 2009.

Conclusion

So, what does all this mean for housing consumers? It will continue to be a buyer’s market for a while. Obviously, we will need to watch developments with credit markets and the GSEs, but if a potential buyer can qualify for a mortgage, there is plenty of choice out there.

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Nationally, interest rates are down to near record lows, housing inventories are at 20-year highs, and house prices nationwide have softened.  The “consumer comfort” index, according to ABC News and the Washington Post, shows that only 30 percent of consumers polled believe it’s a good time to spend their money. Hmm, that’s the lowest percentage for the index in 14 years.  The Consumer Conference Board found the same thing through its widely quoted monthly Consumer Confidence Index. The Expectations Index plummeted to 68.7 percent in November from 80 percent in September, which explains why the ABC/Post index was down for the first of December.

But are the housing bargains out there?  Absolutely!!  How do we know that?  We watch the housing market in many areas that we help home owners sell their homes and from different associations within our industry.  The Mortgage Bankers Association survey recently conducted showed that loan applications more than doubled from the previous period.  This was due to near record interest rates and the Refinance Index increased over 56 percent.

What does this suggest?  That there are housing bargains out there and that buyers know them when they see them.  We know our market areas and we help our clients find those bargains. 

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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>

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