New Home Sales Fall Even as Prices Start to Rise

 

 

 

 

 

 

 

New single-family home sales unexpectedly fell in June, but a sharp rise in prices and declining supply suggested the market for new houses was starting to stabilize, a government report showed on Tuesday.

Other data showed consumers grew more confident about the future this month, even though there were still concerns about lack of jobs.

The Commerce Department said new single family homes sales slipped 1 percent to a seasonally adjusted 312,000-unit annual rate. However, the median sales price for a new home increased 5.8 percent last month to $235,200.

Compared to June last year, the median price rose 7.2 percent. The rise in prices is the latest sign that home values are starting to stabilize.

“New home prices … appear to have reached a bottom. However, that conclusion must remain tentative given the large number of distressed properties,” said Steven Wood, chief economist at Insight Economics in Danville, Calif.

“Fortunately, with no excess … inventory of unsold new homes, any sustained rebound in new home sales should quickly translate into firmer prices.”

U.S. stocks pared losses as a better-than-expected reading on consumer confidence boosted investor optimism, while U.S. bond prices were steady at higher levels. The dollar fell because of the stalemate in Washington over raising the debt limit.

The Conference Board said on Tuesday its index of consumer attitudes rose to 59.5 from 57.6 in June, beating economists’ expectations for a reading of 56.0.
The reports were hopeful signs for the economy, which has struggled to pull out of a soft-patch.

“You got some improvement (in consumer confidence) but I think the one thing that was not very encouraging is that the present situation actually fell,” said Tom Porcelli, U.S. economist at RBC Capital Markets.
“The increase was due to future expectations. It’s good to be hopeful for the future but we want consumers to be more confident in the present.”

Recent data ranging from employment to retail sales suggest growth might not rebound as strongly as initially anticipated, and economists warn that failure to raise the country’s debt limit could push the fragile economy over the edge.

The government is expected to report on Friday that the economy grew at a 1.8 percent annual rate, according to a Reuters survey, after a tepid 1.9 percent pace in the first three months of the year.

The anticipated pedestrian growth pace will mostly reflect a sharp deceleration in consumer spending, which was hampered by high gasoline prices and a shortage of some popular motor vehicle models because supply disruptions from Japan.

New home sales last month fell as sales in the Northeast tumbled to a record low. Sales were also pulled down by a sharp drop in the West.

Economists polled by Reuters had forecast sales at a 320,000-unit rate. In the 12 months through June, new home sales rose 1.6 percent.

Despite lean inventories, recovery in the market for new homes is being frustrated by a glut of previously owned homes, which are currently selling well below the cost of new construction.

There were a record low 164,000 new homes available for sale in June. That compares to about 3.77 million used homes on the market in June, plus properties that are in foreclosure.

The scarcity of new homes is encouraging builders to break ground on new projects. Data last week showed housing starts rose to a six-month high in June.

This article is from msnbc.com Real Estate.


Short Sales: What You Need to Know

 

 

 

 

 

 

 

Perhaps you’ve been hearing a lot about short sales these days. It’s no wonder — the number of short sales on the market has exploded in recent months, as more and more homeowners turn to short sales as a means of avoiding foreclosure.

Some homebuyers seek out short sales in hopes of snagging a good deal. But such sales are not without complications. If you’re considering buying a home in a short sale, here’s what you need to know.

The 411 on Short Sales

When you see a house listed as a short sale, that means the homeowner is trying to sell his property for less than he owes on his mortgage. A bank may agree to this when the homeowner is underwater on his loan and might otherwise go into foreclosure.

Unfortunately, the marketplace is such that the amount the homeowner could sell the property for isn’t always enough to cover the existing mortgage balance, explains Neil Garfinkel, a real estate attorney based in New York City. In these cases, a seller would contact the lender and see if it would be willing to take less than the outstanding balance of the home loan.

What’s in it for the bank?

“Lenders aren’t in the business of owning properties,” says Garfinkel. “In a foreclosure situation, the lender would have to obtain the property back through a foreclosure action. They would then have to maintain the property and ultimately find someone to sell the property to.”

A short sale situation is often compelling for a lender, since the seller has already found someone who is willing to take the property. The lender then just has to make the decision whether it thinks the proceeds from the sale are enough to cover at least a portion of the mortgage, says Garfinkel.

Making a Bid for a Short Sale

Short sales aren’t for everyone. They require a great deal of research from the buyer. At the very least, you would need to view the property, identify all the liens and mortgages and get preapproved for a loan before making a bid.

You also should put together a team of professionals who have experience with the short sale process. Garfinkel recommends a real estate broker, a mortgage professional and perhaps an attorney who all specialize in this type of transaction.

Once you find a home you like and the seller agrees to your offer, you need a contract that’s tailored to a short sale. You’ll want your lawyer, for example, to make sure you have the necessary contingencies in the contract, including one that allows you to walk away from the deal if the process takes too long and your mortgage commitment expires, says Garfinkel.

The Risks of Buying a Short Sale

What are the risks for a buyer? The biggest one is the loss of time. Lenders control the transaction, and it’s entirely possible that a deal could take six months or more to close. It’s also not uncommon for a lender to reject a deal after sitting on the paperwork for many months.

And finally, there’s the money. A buyer may spend a fair bit of cash on out-of-pocket expenses, including attorney’s fees and a mortgage application, trying to buy a short sale only to find out later that the bank doesn’t like the terms of the transaction, says Garfinkel.

Now that you know what a short sale is, you can weigh the pros and cons and decide whether a short sale could be right for you.

This a video transcript go to AOL Real Estate to view the video.


Why Real Estate May Be The Buying Opportunity of the Decade

No one knows what the economy or the stock market will do over the next six months. But when your time horizon is 20 years, the outlook is actually a lot clearer. And right now, all the trends are lining up to make real estate a fantastic long-term buy.

Of course, if you look at recent real estate statistics, the picture is a total catastrophe. Home prices are down by a third, and the decline recently exceeded that of the Great Depression. Across the country, 2 million homes are in foreclosure and another 2 million are more than 90 days behind in their payments. The backlog of foreclosures could last two or three years.

Falling home prices plus the foreclosure backlog probably mean a flat-to-down market over the next couple of years. But beyond the current desolation, the outlook is exactly the opposite. In fact, three different trends are aligning that figure to produce a major home-price boom over the next 20 years.

1. The Economic Cycle. Admittedly, the current recession is far worse than a typical cyclical downturn. Nonetheless, the economy has grown for seven straight quarters. It is possible that there could be a double-dip recession – triggered perhaps by the default of Greece or Portugal. But the worst damage to the U.S. economy appears to be behind us. Home prices are largely driven by demand, which depends on the number of people working, their prospects for salary increases and the availability of credit for mortgages. All three of those things are bad right now, but they typically lag the economic cycle for GDP. Once the economy finally recovers, the factors that drive housing demand will follow.

2. The Real Estate Bust. The collapse in housing prices has destroyed confidence among home buyers and left perhaps a quarter of all properties worth less than the mortgages they carry. But the experts see prices within 5% to 10% of a bottom. Once the process is done, prices will have been knocked all the way down. As a general rule, the worse the crash in a market, the longer the subsequent recovery can last, because there is nowhere to go but up.

3. The Inflation Outlook. The combination of a cyclical economic recovery and the end of the housing bust is by itself reason enough to buy real estate. But in my view, there is an even more compelling long-term argument – the near-inevitability of higher inflation, as I have argued before. Basically, if the U.S. continued building up debt at its present rate, the country would eventually end up where Greece is today. The reason that won’t happen is that while Greece’s debt is in euros, a currency it can’t control, U.S. debt is in dollars. The U.S. will always be able to pay its debts because the Federal Reserve and the Treasury can simply work together to create more dollars (what people used to call “printing money” in the days before electronic funds).

The catch is that creating money that way would eventually lead to inflation and the devaluation of the U.S. dollar. In such an environment, any kind of tangible property appreciates rapidly. The last time such a pattern occurred was in the 1970s as inflation soared into double digits. Of course, ’70s-style inflation might not recur if federal spending is slashed, taxes are raised and oil prices fall. But that’s not how I would bet.

The real estate market may not quite have bottomed out yet. And the boom I’m talking about will probably take more than a decade to unfold. It also may not apply as directly to real estate stocks. Home builders have more complex problems and real estate investment trusts often depend on commercial properties that are sensitive to business conditions. But the next two or three years should offer exceptional opportunities for buying actual real estate – primary residences and vacation homes – preferably somewhere that’s green.

This article is from Time Moneyland.


Housing Prices are Falling and Closing Costs are Rising

 Housing prices may be dropping across the country, but closing costs are on the rise nationwide. The average origination and title fees on a $200,000 home are $4,070 according to Bankrate’s most recent survey of closing costs for 2011. That is a jump of 8.8 percent from 2010 when the average rate was $3,741. New York is leading the pack with average closing costs being $6,183, and is followed by Texas at $4,944. The cheapest closing costs nationwide are Arkansas, North Carolina and Indiana where the average is $3,400.

Now that the facts and figures have been established the question to be asked is: Why are closing costs going up? The biggest bulk of that answer lies in direct lender fees. Mortgage lenders claim the reason their fees have increased is because of tighter mortgage regulations implemented by the government over the past two years. Strict regulations require more personnel to ensure complete compliance. Next in line are third party fees including title, appraisal, postage/courier, and survey charges averaging around $2,456, up 7.9 percent from 2010. Among these third party fees title insurance has changed very little compared to last year.

Even though closing costs have risen since 2010 that doesn’t mean you have to be chained to the highest fees on the market. You can shop around and negotiate most fees. When shopping around be sure to get good faith estimates (GFE’s) from at least three different lenders and use a reputable lender who you can access. A good GFE will include a breakdown of estimated closing costs, rate and payment information.

If you’re going to shop around for title insurance you want to make sure the savings is going to be worth your time spent shopping. Some states regulate title insurance premiums while in other states they vary. The Bankrate survey discussed above indicates the average premiums for title insurance was $1,653 nationwide. North Carolina has the cheapest average at $993 while New York is the most expensive at $2,811. Whether you live in a state that regulates title insurance premiums or not it never hurts to shop around. But remember with anything, sometimes you get what you pay for….usually if you find someone who is far less is costs than the majority of the service providers out there, typically you will find they deliver a substandard product.

View original article here.


Real Estate At Your Fingertips

Searching for homes for sale has just gotten even more high tech. A slew of smartphone apps have hit the market making it a lot easier for homebuyers to find the home of their dreams. The apps work in conjunction with the smartphone’s GPS literally giving step by step directions to a properties location. Theses apps have really cool features that allow shoppers to take virtual tours, call a sellers agent instantly, and download open house dates to the phones calendar. Watch this video from CBS MoneyWatch for more info.